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https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis First NBC and New Orleans in 1831: The city was lit by and had the beginnings of its first Improvement Bank. tjy y ijiii J ] H B H H B lif 1 n 1831 N ew Orleans was a rapidly growing city constantly needing improvements. O ne of the vital improvements made at this time was the basis for the founding of a new bank, the N ew Orleans Canal and Banking C om pany, the ancestor of the First National Bank of Commerce. T he A ct of the Louisiana State Legis lature that created the N ew Orleans Canal and Banking Com pany stated that, in addition to its normal banking activities, the Bank had the purpose of cons tructing a much needed canal from above Poydras Street to Lake Pontchartrain. Thus the very first of a list of “ improvement banks” was begun. I First N B C has changed its name and location, but it has always adhered to the attitude of constant improvement, of progressiveness ana of stability. These are the qualities that enable First N B C to best serve all your corre spondent banking needs. For information on First N B C ’s cor respondent banking programs con tact D oug Lore at I / 8 0 0 / 4 6 2 9 3 1 1 , within Louisiana, or 1 /8 0 0 / 3 3 3 - 9 6 0 1, outside Louisiana. First National Bank of Com m erce CORRESPONDENT BANKING DEPARTMENT 2 I 0 Baronne S tre e t/N e w Orleans, Louisiana 7 0 1 1 2 M em ber F D IC MID-CONTINENT BANKER for December, 1976 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 3 "CONTINENT BANKER Convention Calendar The Financial Magazine of the Mississippi Valley & Southwest December Dec. 12-15: Robert Morris Associates Financial Statement Analysis Workshop, Atlanta. January December, 1976 Volume 12, No. 13 FEATURES Jan. 16-19: Robert Morris Associates Credit Department Management Workshop, Atlanta, Atlanta Hyatt. Jan. 23-26: Bank Marketing Association Ad vertising Workshop, New Orleans, Fairmont Hotel. February 39 COMMERCIAL FINANCE/BANK PARTICIPATION LOANS: A different approach Eric L. Stone/Richard J. Dorgan 41 THE BANK COST CURVE & COLLATERAL ADMINISTRATION Administration increases result in higher costs 43 PARTICIPATIONS ARE A PROFITABLE PARTNERSHIP Enable customer to meet total financing needs Stephen C. Diamond Sheldon G. Karras 51 A 'WATERGATE' SITUATION IN BANKING Sidestepping ethics can produce it William H. Bowen 54 BANK-COMMERCIAL FINANCE COOPERATION: It can offer benefits to concerned parties 58 FACTS ABOUT COMMERCIAL FINANCING'S ROLE It can salvage troublesome bank clients Robert Schwaab 60 BRANCHING DISPUTE IN OKLAHOMA OBA president quits because of it Rosemary McKelvey 66 CHANGES FACING BANKING ARE SPOTLIGHTED Correspondent bankers meet in Dallas Lawrence W . Colbert March DEPARTMENTS 6 COMMUNITY INVOLVEMENT 10 SELLING/MARKETING 14 THE BANKING SCENE 18 20 24 28 COMMERCIAL LENDING EFTS OPERATIONS MORTGAGE LENDING 32 34 36 36 INSTALLMENT LENDING BANKING WORLD CORPORATE NEWS NEW PRODUCTS STATE NEWS 84 ALABAMA 84 ARKANSAS 84 ILLINOIS 85 INDIANA 86 KANSAS 87 KENTUCKY Editors Ralph B. Cox Editor & Publisher Lawrence W. Colbert Assistant to the Publisher Rosemary McKelvey Managing Editor Jim Fabian Associate Editor Daniel H. Clark Assistant Editor Advertising Offices St. Louis, Mo., 408 Olive, 63102, T e l. 314/ 421-5445; Ralph B. Cox, P ub lish er; Mar garet Holz, A dvertising Production Mgr. M ilwaukee, W is., 161 W. W isconsin Ave., 53203, Tel. 414/276-3432; Torben Soren son, Advertising Representative. 4 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Feb. 3-6: Assembly for Bank Directors, Mexi co City, El Camino Real. Feb. 6-9: ABA National Trust Conference, New Orleans, Fairmont-Roosevelt Hotel. Feb. 6-9: ABA I&PD Risk and Insurance Management in Banking Seminar, Tucson, Doubletree Inn. Feb. 6-9: Bank Marketing Association Com munity Bank CEO Seminar, Marco Island, Fla., Marco Beach Hotel. Feb. 6-18: ABA National Installment Credit School, Norman, Okla., University of Okla homa. Feb. 13-15: ABA Bank Investments Confer ence, Atlanta, Peachtree Plaza Hotel. Feb. 14-16: ABA Bank Telecommunications Workshop, Atlanta, Omni International Hotel. Feb. 15-18: ABA Conference for Branch Ad ministrators, Atlanta, Fairmont Hotel. Feb. 20-26: ABA Operations/Automation Div. Business of Banking School, Fort Worth, American Airlines Learning Center. Feb. 27-March 1: ABA National Credit Con ference, Chicago, Palmer House Hotel. Feb. 27-March 4: ABA National Personnel School, Denver, Marriott Hotel. Feb. 27-March 4: ABA Community Bank CEO Program, Santa Barbara, Calif., Santa Bar bara Biltmore. 87 LOUISIANA 87 MISSISSIPPI 87 MISSOURI 89 TEXAS 88 NEW MEXICO 88 OKLAHOMA 89 TENNESSEE M ID-CONTINENT B A N K ER is published 13 tim es an n u ally (two issu es in May) by Com m erce Pub lish in g Co. at 1201-05 B lu ff, Fulton, Mo. 65251. Editorial, execu tive and business offices, 408 Olive, St. Louis, Mo. 63102. Printed by The Ovid Bell Press, In c., Fulton, Mo. Second-class postage paid at Fulton, Mo. Su bscription rates: Three y ears $21; two years $16; one year $10. Sing le copies, $1.50 each. Com m erce Pub licatio ns: Am erican Agent & Broker, Club-M anagem ent, Decor, Life Insu ran ce Sellin g , Mid-Continent B anker, Mid-Western Banker, The Bank Board Letter and Program . Donald H. Clark, ch airm a n ; Wesley H. Clark, president; Johnson Poor, executive vice president and secretary; Ralph B. Cox, firs t vice president and treasu rer; Bernard A. Beggan, William M. Humberg, James T. Poor and Don J. Robertson, vice presidents; Lawrence W. Colbert, assista n t vice presi dent. March 2-4: ABA Advanced Construction Lend ing Workshop, Columbus, O., Ohio State University. March 6-9: Robert Morris Associates Financial Statement Analysis Workshop, Kansas City, Crown Center. March 7: Bank Marketing Association Com munity Bank Seminar, Milwaukee, Marc Plaza Hotel. March 9: Bank Marketing Association Com munity Bank Seminar, Kansas City, Mar riott Hotel. March 14-16: Independent Bankers Association of America Convention, Washington, D. C., Washington Hilton Hotel. March 15-19: Bank Marketing Association Essentials of Bank Marketing Course—Mid west Extension, Chicago, University of Chi cago. March 20-23: ABA Trust Operations and Auto mation Workshop, Bal Harbour, Fla., Ameri cana Hotel. March 20-23: Bank Administration Institute Corporate - to - Corporate Electronic Funds Transfer System Conference, New York City. March 27-30: Robert Morris Associates Credit Department Management Workshop, Kansas City, Crown Center. March 27-30: ABA National Installment Credit Conference, New Orleans, Hyatt Regency. March 27-April 1: ABA Community Bank CEO Program, Port St. Lucie, Fla., Sandpiper Bay. April April 1-4: Louisiana Bankers Association An nual Convention, New Orleans, Hyatt Re gency. April 1-5: Bankers Association for Foreign Trade Annual Meeting, Dorado Beach, P. R., Cerromar Beach Hotel. April 2-5: Association of Reserve City Bank ers Annual Meeting, Phoenix, Arizona Bilt more. April 3-6: ABA Southern Regional Bank Card Management Workshop, Orlando, Fla., Or lando Hyatt House. April 3-6: Bank Marketing Association Re search Conference, Boston, Hyatt Regency Cambridge. April 17-20: Independent Bankers Association of America Bank Ownership Seminar/Workshop, Las Vegas, Sands Hotel. MID-CONTINENT BANKER for December, 1976 You want a bank that can back you ...over-line or overseas. Count on the total capa bility of Mercantile Trust in St. Louis. We can provide the over line support you need to take advantage of big opportunities And we can support you with a full range of specialized services. For instance, our International Department can help you and your customers with overseas contacts, docu ments, financing, even customs services. When you have an opportunity that calls for something specialcall 314-425-2404. W e ’r e w ith y o u . M E R C n n T ILE B R fK Mercantile Trust Company N.A. • (314) 425-2404 • St. Louis, Mo. • Member F.D.I.C. MID-CONTINENT BANKER for December, 1976 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 5 Community Involvement Seminars Conducted by St. Louis Bank To Help Small Firms Stay Solvent Session of M ercantile Trust of St. Louis's financial services sem inars is shown in progress. Sem inars a re being held for ow ners and m an agers of sm all businesses. s t a t is t ic s indicate that 82% of small businesses fail in their first 10 years. However, the fail ure rate in the St. Louis area will be going down, if that city’s Mercantile Bank has anything to say about it. The bank has developed a 10-week program designed to teach owners and managers of small businesses how to improve company performance and increase profits. Titled “ Financial Management for the Small Business,” the course is con ducted by the financial services divi sion of the commercial banking depart ment and is being directed by Vice President Jerry Goldstein, with the help of Banking Officer John Cipriano and a t io n a l N Jerry Goldstein (r.), v.p ., financial services, M ercantile Trust, St. Louis, presents diplom as to Robert P airs, pres., Vis-A id Industries, and Ted M cCluskey, v.p., G en eral G asket Corp. Two men had completed financial services sem inar spon sored by M ercantile and directed by Mr. G o ld stein. 6 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Banking Representative John Spencer. All three have completed graduate work in business administration. Mr. Goldstein describes the program as a “ cookbook approach” to the subject, featuring step-by-step “ how to” exam ples of small business financial manage ment. Among topics covered in the course are techniques of financial ratio anal ysis, return on investment, profit plan ning, budgeting, sources of capital and how to work with bankers. Tuition is $100 per student, and the course— which is held at the bank— is open to commercial customers and non-custom ers. The seminar is based on one de veloped by Seattle-First National and then modified by Mercantile. The seminar program was started last March after the bank realized small business people weren’t taking advan tage of existing financial management techniques, particularly those used by larger corporations and bankers. The first seminar, designed as a test to see how many it would attract, was open only to the bank’s commercial custom ers on an invitational basis. It went well, with 22 registering. As a result the course then was opened to the public and advertised. Direct mail also was used. Tw o summer sessions were held, with 35 attending each session. Tw o identical courses are being con ducted this fall, also with 70 in attend ance. There’s even a waiting list for fu ture seminars. The courses include reading assign ments from textbooks, case studies and homework problems. One popular tech nique used in the program is “ financial ratio analysis”— each member compar ing his or her own performance to that of other similar businesses in his or her own field. The first three weeks, stu dents are taught to concentrate on understanding financial statements, not from the standpoint of a corporate con troller, but as a means of being able to spot potential trouble from the individ ual reports. According to Mr. Goldstein, these seminars are tailored for firms’ presi dents or GEOs. He points out that stu dents include more than one father-son, husband-wife and partner teams. The same course now is being offered in Kansas Gity by the Mercantile Bank there. Vice Presidents Mike Brosnahan and Bill Sherman are teaching in the downtown Kansas City headquarters. In addition to the small business sem inar, Mercantile Bank has added an in tensive three-day seminar on “ Financial Management for Nonprofit Institutions,” conducted by Mr. Cipriano. This course was offered free of charge to members of nonprofit institutions last summer and will be repeated in the future. The bank believes it is one of the first, if not the first, financial institutions to of fer this kind of course to nonprofit groups. As Mr. Goldstein puts it, the bank hopes to help charitable organizations benefit from the same principles of sound financial management as do busi nesses. * * Bank Supports Renovations John H. Pow ell, officer in charge, LivernoisLyndon Office of M anufacturers Bank, Detroit, checks the lobby disp lay with Richard L. W onby, exec, dir., N orthw est Detroit Non-Profit Housing Corp. The exhibit provides consumer inform ation about Harm ony V illag e, a planned community in northwest Detroit. The project's planners say more than 1,000 properties w ill be renovated and then sold for $15,000-$20,000. The d isp lay exp lain s the program 's m any facets and how it can help area residents. MID-CONTINENT BANKER for December, 1976 “ T H E M O L D C O T T O N F IE L D S D O W N H O M E ” ore still going strong So ore Mississippi's efforts at industrial expansion and in state p-ocessmg of our agricultural products and timber resources for Increased sales on the International market Well bet you don’t know all the facts about the good things we're doing in Mississippi F in d o u t m o r e f r o m F ir s t N a t io n a l B a n k you’ll be interested in what you hear. ippt M e m t MID-CONTINENT BANKER for December. 1976 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Fight Dutch Elm Disease Rehabilitation of Inner-C ity Building Spurs Energy-Conscious Loan Plan T BEGAN with a chance situation, and now it’s developed into a wideranging consumer-loan program giving lower rates to energy-conscious home, auto and boat owners. Seattle Trust financed the preserva tion of an older building in that city’s historic district, and the bank realized the size of the market involved in older neighborhoods was great. At press time, the bank was financing its 15th restora tion, one of which involved a large in ner-city neighborhood of about 3,200 dwelling units. Since Seattle Trust serves as con tractor to fund and assist the neighbor hood corporations in updating the dwellings to modern health and safety standards, it counsels and qualifies resi dents for conventional and subsidy fi nancing. An important factor was ef ficiency through economical energy consumption, and the bank felt that a customer who is thrift-conscious and conservation-minded is one who is scru pulous about his affairs and careful with his property and possessions. Cus tomers displaying these interests, a I Bicentennial Year Climax bank spokesman says, would be less of a risk for a loan, due to lesser deprecia tion of property for which the loan is made. What the program entails is discounts of from one-half to /!% on loans to cus tomers who qualify for the energy-con servation loans by meeting standards the bank has set. A point system gives credit for in stallation of insulation, double glazing, storm doors and weatherstripping and use of heating system improvements or energy-saving appliances. Automobiles that are rated by the Environmental Protection Agency as getting 25 miles per gallon or better on the highway qualify for lower loan rates, as do sailboats, boats powered by engines of 25 horsepower or less and boats with certain hull configurations. The bank reports much favorable re sponse to the program. Letters have been received from the public and from professionals in the field of energy con servation. What’s more, those qualifying for the lower loan rates are saving money! * * Exam ining tree cuttings for signs of Dutch Elm disease a re (from I.): N olan N athe of the City Forestry Div.; John Forney, v.p. and account exec., Stevenson & Associates; Jim W illiam s, urban developm ent off., First N at'l.; and Gene La V a q u e , e.v.p. and account exec., Stevenson & Associates, all of M inneapolis. An extensive public-service cam paign sponsored by the bank is said to be creating a substantial increase in public a w a re n e ss of the local Dutch elm d isease epidem ic and is expected to lead to legislative action for an on-going control pro gram . First Nat'l becam e involved in the pro gram after a num ber of em ployees expressed concern about the problem. In Illinois: Bank Doll House Displays Built by Senior Citizens Am erican Nat'l, Chattano oga, Tenn., presented this custom -m ade replica of the Liberty Bell to the new C hattanooga-H am ilton County Bi centennial Library. Shown with the bell are, I. to r.: Katherine Arnold, dir. of the lib rary; Raym ond Witt, ch. of the lib ra ry; and Sam I. Y arn ell, ch. of the bank. In presenting the bell to the lib rary, Mr. Y arn ell said that the occasion culm inated one of the bank's m ajor bicentennial events. Am erican N at'l had of ficially presented the replica to the lib rary's board in July, 1975, and had been displaying it in the bank's branches for view ing by a re a residents until the new lib rary w a s opened officially. The replica w a s built by Schulmerich C arillons, Inc., of Penn sylvan ia and is a q u ar ter-scale reproduction of the original bell, w hich is housed in P hiladelph ia's Independence H all. 8 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis T w o banks in Illinois, Avenue Bank, Oak Park, and Palatine National, have featured lobby displays of doll houses constructed by groups of senior citi zens. The Swiss chalet doll house exhibit ed in Avenue Bank’s lobby was built by 17 members of the Oak Park-River Forest Senior Citizens’ Center. The doll house features a fireplace with miniature logs, a bicentennial petit point rug, custom upholstered furni ture, ceramic decorator plates, grasscloth wall coverings and braided rugs. Completing the interior appointments are a macrame hanging, an oil paint ing, pillows, a mattress, bed sheets and a knitted afghan. The house’s exterior features a stone walkway, jewel tree, rock gai’den and swing. After exhibition at the bank, the doll house was displayed throughout the Oak Park area. A drawing will be held for the miniature chalet sometime this month. Customers of Palatine National were able to view a 1776 early American doll house in that bank’s lobby. A three-story brownstone, the reproduc Members of O a k Park-River Forest Senior Citi zens' Center in Illinois constructed this Swisschalet doll house which is exhibited in Avenue Bank, O ak Park. Pictured in photo are (from r.): Jerry D. M ackey, bank pres.; Stew art Purinton, Center rep.; and Ralph Hayden of GuyH ayden A ssociates, firm that provided counsel on interior design. tion was a bicentennial project of 20 people at the St. [oseph’s Home for the Elderly. It was constructed on a scale of one inch to the foot and, according to a bank spokesman, will go on display as an entry in the Senior Citizens’ Art Fair competition held at the Chicago Museum of Science and Industry. MID-CONTINENT BANKER for December, 1976 Foreign drafts and collections are processed faster when they go by the book. The b o o k. Follow Bank of America’s Foreign Drawing and Remittance Manual and you can cut down on the usual processing time for overseas drafts and collections —perhaps by as much as one half. Here’s how: we send you pre-authorized forms I for foreign drafts and documentary collections. So you ■ can give your customers an immediate confirmation. ? Then you can send the action form directly overseas. And even though you don’t have to route the processing through any office of Bank of America, everything still remains under our control. Why not send for a copy of our book and learn how you can speed up your foreign drafts and col lections. Ju st fill in the coupon and mail it to one of our correspondent banking sections. Go by the book and your processing goes a lot faster. B A N K of bankofamerònt& sa■ memberfdic AMERICA Co rresp o n d en t Bank Service MID-CONTINENT BANKER for December, 1976 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Yes, Iwant to 90 by the book. n Please have a correspondent banking specialist contact me about the Foreign Drawing and Remittance Manual, and your service. M AIL TO: Correspondent Banking Section, Bank of America Center, 555 California St., San Francisco, CA 94137 OR: Correspondent Banking Section, Bank of America Tower Bldg. 555 S. Flower St., Los Angeles, CA 90071 NAME T IT L E BANK A D D RESS CITY STATE ( ) PHONE ZIP j 9 Selling /Marketing Open Sunburst!' Banking Package Program Produces Good Results For Bank in Texas W hen Parkdale State, Corpus Christi, Tex., began offering a package of ser vices in July, 1975, the program not only produced more new business than had been anticipated, but it also won awards from the Corpus Christi Adver tising Federation. The ad campaign, called "Open Sunburst!,” garnered a Gold Award, highest presented for a complete campaign; two Silver awards for radio commercials used in the cam paign and a Merit Award for outdoor painted bulletins. !OPEN-M-MSUNBURST!! IniT",." Mitagfc, » M W . ih» ... ■■I,— ..................... s&nplißed banking at Partutote. More Smiling Employees: The S tin to s i Account. Only at Pai kidleBank This n ew spaper zip-out ad invited public to fill out coded coupon application for Parkdale State of Corpus Christi's "O pen Sunburst!" a c count. suits, according to Vice President Hoke B. Smith III, and was followed by an other mailing two weeks later. Besults, in terms of both applications Hoppy man on outdoor billboard w a s used to attract attention to P arkd ale State of Corpus Christi's "O p en Sunburst!" account. Basically, the Sunburst Account is a package of banking services, earmarked by a $3 monthly charge, which entitles customers to paid-for checks and check service charges, BankAmericard with check-guarantee card, safe deposit box, $10,000 accidental death insurance, savings account, travelers checks, cash ier’s checks, notary service and a pre ferred rate on installment loans. The target market was customers who could qualify for the BankAmeri card credit line, on which accompany ing overdraft protection was based. The media campaign, consisting of radio, newspaper and outdoor posters, was de signed to create widespread awareness of the service and to enhance the bank’s position as an innovator in the Corpus Christi market. The “ Open Sunburst!” theme was followed consistently to maximize public awareness and bank identity. Specifically, promotional s tr a t e g y consisted of identifying and pre-approving prospects from the bank’s cus tomer base. A pre-campaign direct-mail notification was used with effective re10 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis and accounts opened, exceeded projec tions by a substantial margin during the campaign, says Mr. Smith. Although media promotion of the service ended last December, applications and new accounts continue to outdistance pro jections. Perhaps most importantly, he adds, the bank’s revenue and income from the Sunburst accounts have been gratifying as well. The PopCorner Bank! When yours is one o f seven finan cial institutions in town, you’ve got an identity problem! But the people at Berkshire County Savings Bank, Pittsfield, Mass., solved their ID problem in a unique manner. According to Robert A. Wells, executive assistant to the bank’s president, the bank began to asso ciate itself with an antique popcorn wagon that had been parked beside the bank every summer since the early days of the century. The banker realized that the wagon was a local fixture and the bank had often been referred to as the bank next to the popcorn wagon. In 1973 the bank began a series of institutional ads depicting the wagon and the bank at “ PopCorner.” Later, weekly “ free popcorn days” were instituted by the bank and the wag on was featured on hot-dish tile gifts for customers opening Christmas club accounts. Still later, popcorn wagon coin banks were sold by the bank. According to Mr. Wells, the pop corn promotion has earned the bank nationwide publicity and he reports that deposit gains over competing institutions have been extremely sat isfying. 'Shoppers’ Used by Bank To Improve Service Every bank wants to project a friend ly image and hopes its employees al ways provide “ service with a smile.” However, because they’re human and have their good and bad days, there probably are times when bank em ployees are less than pleasant. W hen management of Marine Mid land Bank in Rochester, N. Y., realized that service to its customers was slip ping, it took action to halt the process by initiating a “ Service With a Smile” pro gram among staff members in the bank’s Rochester region. The project began August 25, 1975, and ran six weeks. Its objective was to encourage em ployees— by offering them monetaryrewards— to display proper, courteous attitudes toward customers, thus re sulting in friendly, yet professional ser vice. Two shoppers from a local personnel agency were employed and given an in tensive one-week training course in bankprocedures. These “ service sleuths,” in conjunction with the bank’s marketing department, devised actual day-to-day situations that occur in the bank. The shoppers proceeded to pose as custom ers, both in person and on the tele phone, to determine whether the con fronted employee was delivering good, courteous service. Criteria for a “ win ning performance” were set forth b e fore the shoppers went out into the field. Although these criteria were quite specific, the shoppers themselves often had to make a judgment decision on whether an award should be given. Before the program began, the entire bank staff was notified about the pro gram and the awards it would produce. Additionally, department heads were encouraged to brief their employees and instill a cooperative spirit in them. Buttons were distributed to everyone as a reminder. A winner was given $10 on the spot, and every winner qualified MID-CONTINENT BANKER for December, 1976 A few of the quiet places in America are captured in water color and reproduced in the beautiful — Landscapes.Thro new Landscapes Series of checks from Harland. This vibrant new series will be a welcome addition to your check offering, and is certain to be a new favorite of your bank’s customers. Ask your Harland Representative about the new Landscapes Series. THOMAS B. ANDERSON , 1234 YOUR STREET ANYTOWN, J. S. A - A! 101 m: oooo «-oooo *: i THOMAS B. ANDERSGW 00-000 W /l H ARLAN D BAN K l l ANYWHERE, YOUBZTATE3034* For___________________ __________________ h : ooqo '«oooo »: THOMAS B. ANDERSON 1234 YOUB STREET ANYTOWH U $. A. a For_____________________ _____________ _— h :0 0 0 0 '" J0 0 0 i : * ? * u se lE 3 V 5 B 7 flci*B 101 00000 H ARLAN D BAN K ANYWHfRE UCrjKSTATE3Q3AS h : oooo *-oooo «: https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis P. O. 105250, ATLANTA, GEORGIA 30348 for a grand drawing for one of 10 $50 prizes at the end of September. When the program ended, more than 350 per sons had been rewarded. Because the bank’s management had known about the slippage in customer service, it wasn’t surprised, right after the program began, to find a significant percentage of employees “failing” the shoppers’ tests. However, as the pro gram began to roll, there was a notice able improvement in the employees’ general attitudes and their outlook to ward customers. The percentage of winning contacts improved to more than 95% in the final two weeks of the program. According to Jeffrey M. W estergren, assistant vice president and marketing director, the bank’s employ ees were extremely excited about the prospects of winning, while customers made unsolicited comments to manage ment about the improved service they were getting. Although some of the ex citement died down after the program was over, Mr. Westergren says the bank believes it significantly improved delivery of services to customers and boosted employee morale. Because of these results, Mr. Westergren points out, the bank would not hesitate to re vive the program at any time. Good for Something: Bank Announces Opening By Spreading Bogus Cash In addition to the more traditional publicity methods of newspaper, radio and direct-mail ads, Citizens Bank, Warrensburg, M o., used an airplane to spread the word about the opening of new quarters. The father-son team of Adrian and Lynn Harmon loaded their twin-engine plane with hundreds of dollars in bogus The father-son team of bankers A d rian and Lynn Harmon board their tw in-engine airp la n e and take along a briefcase containing hun dreds of dollars in bogus cash. "Funny m oney" w a s dropped across a re a of Citizens Bank, W arrensburg, Mo., to help publicize opening of new building. Fake m oney could be e x changed for real thing during open-house event. 12 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis currency, which they dropped all over the bank’s area. No, the two bankers aren’t in trouble with the U. S. Trea sury Department; the “funny money” could be exchanged for the real thing during the open-house celebration. W hen originally opened in 1971, the building was a drive-up, but it suffered such growing pains that it was replaced by the new Citizens Bank North, a brick, stone and aggregate structure with 20,000 square feet of space. Be sides the three drive-up stations, the building has six tellers windows. The main lobby is accentuated by a multi-level ceiling and has desks for seven officers. Ten other offices and the bookkeeping and proof rooms also are housed on the main floor, while an em ployee lounge, kitchen area and storage vault are on the lower level. And, a bank spokesman says, the distribution of bogus cash proved to be a hit with area residents. During the open house, more than 750 people visited with staff members, registered for free gifts and were given tours of the building. how the bank prepares account state ments for the account owner.” As a representative example, here is a portion of the new wording on a Bank of America joint checking account agreement: “ You (the bank) may pay out funds with any (number) of the signatures below— if I (the customer) choose a JOINT account. However, you may require all our signatures if there are conflicts among us.” “ One area where the plain-language format should be o f the greatest help,” a Continental Bank spokesman said, “ is with privacy. Many consumers have misapprehensions about a bank reveal ing information about personal ac counts, but with the new wording on the agreement, customers should under stand their rights completely.” 'Money Grab' at Bank Something for Everyone: Banks Rewrite Agreements Using Simplified Language Customers of Continental Illinois Na tional, Chicago, and Bank of America, San Francisco, no longer will have to wade through words such as “ thereon,” “heretofore” or “ therefrom” to under stand the terms o f their checking or savings accounts. The banks have in stituted rewritten and simplified agree ments, using “ plain English.” N ew agreements for personal check ing and savings, premium interest rate and Christmas club accounts have been distributed to current Continental Bank customers and will be given to appli cants for new accounts. At Bank of America, the “legalese” has been taken out of the forms and the first installment o f the bank’s most widely used forms— eight bank-depos itor agreements (signature cards), the All-in-One checking account form and applications for BankAmericard and Instant Cash. N ew passbooks for In vestors Passbook and regular savings accounts are scheduled to join the list soon. “ The new agreements should give our customers a much better idea of their banking relationships with us,” a Continental Bank spokesman said. “ The agreements clearly spell out how de posits or withdrawals can be made, how interest is paid and computed on sav ings accounts, what happens if an ac count is dormant or abandoned and In the top photo, 10-year-old Huey Hall is show n carrying m oney from the vault of the new Downtown Center of Bank of O a k Ridge, Tenn. No, Huey w asn 't robbing the bank. He w a s collecting the first prize a w a rd e d during the grand opening of the new facilities—a "m oney g ra b " (up to $3,000). Second prize w a s a full y ea r's utilities bills paid (up to $1,000), and third prize w a s a "grocery g ra b " in a local superm arket (up to $500). Bank visitors registered for these prizes. In the bot tom photo, young Huey stands proudly behind his pile of cash, surrounded by bank officers (I. to r.): Ed Penland, s.v.p .; Don Carpenter, v .p .; Jam es Griffin, a .v .p .; Don M axw ell, pres.; and Ralph A urin, e.v.p. The opening festivities w ere featured on the front page of the O a k Ridge n ew spaper. Huey "g ra b b e d " about $ 1,200 ! MID-CONTINENT BANKER for December, 1976 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis The Banking Scene By Dr. Lewis E. Davids Hill Professor of Bank Management, University of Missouri, Columbia What’s the Brouhaha About Insurance? R ECEN T PROPOSAL by the Comptroller of the Currency (12 CFR Part 2) would prohibit a national bank, its officers, directors, employees or principal shareholders from acting as agents for the sale of credit life, health or accident insurance unless all income from such a sale would be credited to the bank, a wholly owned subsidiary or an affiliate whose beneficial owner ship is identical with that of the bank. This is a sensitive area for small unit banks that have more than one share holder. I would estimate that at least 10,000 of this country’s banks, both national and state chartered, have an important stake in what the resolution of this proposal will be. A number of factors must be recog nized in consideration of 12 CFR Part 2, factors that are likely to be swept under the proverbial bank-lobbyist car pet. One of these factors is that the typical borrower wants this kind o f in surance and that he or she isn’t coerced into purchasing it—borrowers recognize A credit insurance when borrowing, but they aren’t the people w ho borrow in installment-loan form: Such persons can borrow in other forms and at much lower rates. I think this situation raises a number of unanswerable questions about the accuracy of some of the bank ing statistics about consumer loans that some consumerists quote so glibly. Another often-overlooked aspect of credit life involves the benefits of a group policy versus those of individual policies. Larger banks generally opt for the group-policy concept, in one form or other, while smaller banks usually adopt individual policies, with their attendant higher premiums. Few people believe that individual policies can be written as economically as group policies, but there are numer ous state laws and regulations that can alter this generality. In some cases, the maximum dollar premium per $100 of a loan becomes a determinant when an institution is deciding whether to elect for group credit life, individual credit ". . . Common law has long recognized the illegality of any diversion of corporate opportunity. Is there a need for (a regulation by the Comptroller of the Currency) to reaffirm that which already is part of our common-law tradi ion?" that insurance can affect ability to pay back a loan and that the modest insur ance charge for the loan can relieve the borrower of that problem. Borrowers also know that lenders will be more willing— and able— to extend credit if the borrower is protected by such in surance coverage. Yet, all too often, consumerists of the “ Ralph Nader” persuasion contend that there is a forced “tie-in,” that the installment-loan borrower is forced to take the insurance and has to pay a dis proportionately high rate for it. But too few banks fail to charge a higher rate of interest to borrowers who don’t elect to buy credit insurance. It’s true that people of substantial wealth don’t need 14 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis life or to say, “ to heck with it, it’s not worth the time and effort involved.” These decisions should be made by the individual bank, taking into considera tion its relationship to the regulations. The text of 12 CFR Part 2 conveys a subliminal message to the reader, and it forbodes a rather pervasive tendency: It attributes decisions made in a bank to rather unsocial, base instincts. The Comptroller’s proposal presupposes that the typical bank is playing a game of “ diversion of corporate opportunity,” that is, that a bank’s directors either don’t know what is going on (which is b a d ), or that the board as a whole is stupid or venile (which is worse). Either of these postures is an insult to prudent directors. The assumption that bank di rectors are given the “ mushroom” treat ment by management— where the board is kept in the dark and is well fertilized with meaningless information— flies in the face of reality. A more wholesome and realistic ap proach by the Comptroller would be to believe that the typical bank director is an understanding individual, one who was chosen to serve on a bank board because he or she is interested in na tion and community and is alerted by management to, or otherwise is aware of, banking policy issues, especially those involving possible diversions of corporate opportunity. Basically, 12 CRF Part 2 boils down to this: Does an officer, director or bank employee who sells credit life, health or other types of insurance really divert “ cor porate opportunity” from his or her bank? In many states, banks are prohibited from selling this type of insurance. In such situations, the answer to the prob lem is clear, since banks are precluded from the “ opportunity” by state law. But it is in the interest of borrowers, the public and banking that risks in in stallment lending be reduced, and pro viding borrowers with life insurance is one way to do that. I think the sponsors of 12 CRF Part 2 should consider why some states have taken a stance against insurance being sold by banks. Does such a move make sense today? I know of no instance where management of a bank was not aware that an officer, director or em ployee of the bank had at some time sold this type of insurance. And I can recall no situation where a bank’s man agement was not aware that the person writing such a policy did or did not re ceive income from doing so, or the ap proximate amount of money involved in the transaction. If a bank employee re ceived outside income from an insur ance sale, his or her salary would be adjusted in relationship to that income. But in such a case, we must take into MID-CONTINENT BANKER for December, 1976 A DAY IN THE TRANSIT DEPARTMENT. The Transit Department is working late again. United Missouri’s Transit Department works 24 hours a day —five days a week, and 18 hours a day on weekends. This enables us to give better service at lower costs. It’s why you should send the coupon for our Rapid Transit Item Profitability Schedule and other information. Or better yet, ask about our 30-day trial o f guaranteed better service and better costs. You can phone collect. You have nothing to lose, and profits to gain. Correspondent Department United Missouri Bank of Kansas City, N .A . , 10th & Grand, Kansas City, Mo. 64141 (816) 221-6800 □ Send me the Rapid Transit Profitability Schedule. □ I’m interested in your 30-day trial, too. Name____________________________________ • Address----------------------------------------------------- • City______________________________________ I State-------------------------------------- Zip-------------- I L_____________________________________________J UNITED MISSOURI BANK OF KANSAS CITY, N. A . MID-CONTINENT BANKER for December, 1976 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 15 Tax-Exempt Trust Set Up "The assumption that bank directors are given the 'mushroom' treatment by management— where the board is kept in the dark and is well fertilized with meaningless information— flies in the face of reality." consideration whether state law per mitted the sale; it may, superficially, appear to be a diversion of corporate opportunity, but I think this is more a de jure than a de facto situation. Theoretically, it’s true that a minority shareholder could benefit if his or her bank had received income from selling insurance equal to commissions paid the officer, director or employee who made the sale. However, the fact is that the shareholder would not really benefit. W hy not? Motivation for increasing one’s income through sales of credit life is reduced when a bank preempts the entire commission, as is done in many states. Thus, w e return to the question of which style of management is better. I’m not sure that what works well for a major branching bank— some form of group life, for instance— would work well for a small unit bank. I would prefer that there be no regulation in this area, a situation I find preferable to the proliferation of regulations we have experienced in the last decade. My reasoning for this is that a prudent di rector knows that he or she has a number of basic duties and responsi bilities that accompany the job, and these include honesty, fair dealing and avoiding diversions of corporate oppor tunity. The rights of minority shareholders are of serious concern, especially for the 300 “ problem” banks in this nation. At issue is not what is prohibited by regu lation, but how those prohibitions usurp management’s prerogatives. Frankly, regulatory examination procedures can — and should— look into any perceived diversions of corporate opportunity by any banker, and the examiner should note those diversion possibilities on the report of examination, insisting that the bank’s board respond. I think that, in most cases, it would surprise examiners to find out that a bank’s board had been aware of the situation and already had considered ways of handling the prob lem. But what should be done where an examination reveals a true case of de facto an d /or de jure diversion of cor porate opportunity? M y answer is sim ple: Common law has long recognized the illegality of any diversion of cor porate opportunity. Is there a need for 12 CFR Part 2 to reaffirm that which already is part of our common-law tradition? * * Unmatured Loan Balance 12 months ending last June indicates that in the Ninth District (served by the Wichita bank), 46% of the volume loaned was used to refinance existing indebtedness and 33% to buy land. Other purposes included buildings and improvements, operating expenses, stock and other expenses associated with the loan. The average size of Land Bank loans closed during the year ending last June 30 varied from $66,405 in Oklahoma to $139,706 in New Mexico. The aver age for the 6,927 loans closed in the district was $79,376. Only 1.57% of the bank’s 45,145 loans were delinquent last September 30. This compares with 1.5% on the same date last year. Land bank loans are made on a variable rate that goes up and down according to economic conditions and cost of operation. As of June 30, 62.9% of the number of outstanding loans and 87.1% of the outstanding volume were on the variable rate. The variable rate for Land Bank farm and ranch real estate loans as of November 1 was 8.5%. At Wichita Land Bank Reaches $2-Billion Mark W IC H IT A — The Federal Land Bank here reports that its unmatured loan balance passed $2 billion early last month. It took 57 years (the bank was chartered in 1917) to reach the first $ 1-billion milestone of service. Then, in only three years, this has doubled, according to the bank, because of the exceptionally strong demand for long term credit by farmers and ranchers responding to the increasing need for food and fiber. New-money lending by the Wichita Land Bank during the nine months end ing September 30 was $340.8 million, or 620% more than the $54.9 million loaned during the same nine-month period in 1970. A study of the purposes for which Land Bank loans were made during the 16 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis For Missouri Bankers; To Be Operative Jan. 1 JEFFERSON CITY, M O.— The Mis souri Bankers Association has formed the MBA Voluntary Employees’ Ben eficiary Association (V E B A ) in an ef fort to better serve its member Iranks and their employees, particularly in the health care and insurance areas. VEBA is a tax-exempt trust formed under Section 501 (c ) (9 ) of the In ternal Revenue Code. It’s governed by a board of eight trustees (one from each M BA region), whose appoint ments must be approved b y the MBA’s board. Trustees will serve three-year terms. They will set policy for all MBA insurance programs administered by the trust. They also have the authority to adopt new insurance plans, to choose underwriters and to determine benefits and premiums. The trust will operate as a separate entity from the MBA and will serve those member banks that elect to take part in the insurance programs. Felix LeGrand will becom e trust administra tor following his December 31st resig nation as MBA executive vice presi dent. VEBA will becom e operative Jan uary 1. According to the MBA, the trust of fers several advantages to both the MBA and participating banks and their em ployees. These include: 1. Elimination of IRS non-dues in come tax problems for the MBA. 2. Preparation of ERISA and nu merous other reports required by the government will be the responsibility of the trust, thereby eliminating the fidu ciary liability, expense and time of bank personnel and M BA staff members. 3. Administration of the MBA’s group insurance programs will be im proved, resulting in better service and, hopefully, better member relations. 4. The actuarial pool will be limited strictly to bankers, a factor that should improve the trust’s experience and help stabilize rates. 5. Last, but most importantly, the trust will lead to stabilization of rapidly increasing health care rates. This should be accomplished b y billing, collecting on an annual basis and investing the premiums, thereby establishing the trust’s own premium-stabilization re serve fund. The carrier will be limited to payment of claims only on a costplus basis. MID-CONTINENT BANKER for December, 1976 This advertisement is neither an offer to sell nor a solicitation of offers to buy any of these securities. The offering is made only by the Offering Circular. N E W ISSUE October 29,1976 $25,000,000 United States Trust Company of New York 8K% Capital Notes Due 2001 Price 100% plus accrued interest from November 1, 1976 THE NOTES ARE NOT DEPOSITS, ARE SUBORDINATED TO THE CLAIMS OF DEPOSITORS AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION. Copies of the Offering Circular may be obtained from any of the several underwriters, including the undersigned, only in States in which such underwriters are qualified to act as dealers in securities and in which the Offering Circular may legally be distributed. The First Boston Corporation Morgan Stanley & Co. Bache Halsey Stuart Inc. Blyth Eastman Dillon & Co. Incorporated Dillon, Read & Co. Inc. Incorporated Donaldson, Lufkin & Jenrette Drexel Burnham & Co. Securities C orporation In corporated Hornblower & Weeks-Hemphill, Noyes E. F. Hutton & Company Inc. Goldman, Sachs & Co. Keefe, Bruyette & W oods, Inc. Incorporated Kidder, Peabody & Co. Kuhn, Loeb & Co. Lazard Frères & Co. Incorporated Loeb, Rhoades & Co. Incorporated Merrill Lynch, Pierce, Fenner & Smith Paine, W ebber, Jackson & Curtis Incorporated Reynolds Securities Inc. Shearson Hayden Stone Inc. Lehman Brothers Incorporated Salomon Brothers M. A. Schapiro & Co., Inc. Smith Barney, Harris Upham & Co. Warburg Paribas Becker Inc. Incorporated Wertheim & Co., Inc. W hite,W eld & Co. Dean W itter & Co. Incorporated Incorporated MID-CONTINENT BANKER for December, 1976 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Bear, Stearns & Co. 17 Commercial Lending Banking s Stability in Dark Years Spotlighted at R M A Fall Conference AN KIN G’S PROBLEMS of the past few years were not overlooked at the annual fall conference of Robert Morris Associates in October. H ow ever, they were put in perspective to show that, despite everything that hap pened, the biggest percentage of banks — and their stockholders and depositors — came through unscathed. For instance, the conference’s key note speaker, Roger E. Anderson (chairman, Continental Illinois Corp. and Continental Illinois National, Chi ca g o), had as his topic, “ 1974-75: Bank ing’s Stability in T w o Dark Years.” Mr. Anderson said that although he isn’t minimizing the seriousness of the situa tion in 1974 and 1975, he maintained that the pessimism was, in large part, exaggerated and generated by an in sufficient knowledge of the banking in dustry. Nevertheless, he continued, anyone looking for reasons to worry didn’t have to go far to find them. Bank ing, he continued, was being threat ened internally by the consequences of previous expansionist policies, actions and expectations and threatened ex ternally by global inflation and reces sion plus deep-seated public uneasi ness about the stability of the banking system, soundness of its structure and adequacy of its regulatory apparatus. Mr. Anderson reviewed 1974, which saw two $ 1-billion-plus banks failing. He pointed out that the outlook for commercial banks at that time was translated, in part, into closer and in creased attention to the capital-ade quacy problem. The Fed referred to the capital-adequacy factor in its de nial of applications for new activities by some of the strongest banks in the country. According to Mr. Anderson, there was no doubt that the ratio of capital to assets of U. S. commercial banks had declined significantly, and this was a lesson that didn’t need to be told twice in 1974. Within many B individual banks, he said, the rapid growth of assets relative to capital had induced managements to approach fur ther expansion into new areas with greatly increased caution and also to becom e more restrictive in their lend ing policies. This kind of management response to the challenges of what may have been banking’s darkest year in recent history illustrates the system’s essential health and stability, said Mr. Ander son. He strongly emphasized that de spite the problems that developed, the commercial banking system functioned capably and effectively in administering the expansion of credit during a period of serious economic and financial stress. Banks did their appointed job in the economy during this period, he main tained, and for the most part, they did it very well. “ Those who fail to grasp this fairly self-evident truth,” he said, “ and they are many, also fail to understand the even more basic fact that to a great ex tent, the difficulties that have confront ed the commercial banking system mir ror a vast and complex set of world wide problems that had been develop ing for about a decade.” Mr. Anderson backtracked to 1965 “ to see how w e got where we did and to reassure our critics that banking does not function within a neatly de fined vacuum o f its own making.’’ He then took a brief look at 1975, when the econom ic upturn began. However, he pointed out that he didn’t want to give the impression that banks had a picnic in 1975. In many respects, he said, 1975 was a most difficult year, largely because of a widespread public misperception that financial intermedi aries in general were in trouble. Mr. Anderson listed some areas that were magnets to which public interest was drawn in 1975: • Lending relationships with the real " Considering all the U. 5. commercial banks in their entirety, w e cannot help but be impressed by the extraordinary vigor of the banking community and the vitality of its earning power. The ability of commercial banks in general to withstand losses of a magnitude experienced only once before in our financial history— and to emerge stronger than before— is worthy of far greater note than it has received/'— Roger E. Anderson. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis estate industry, including real estate in vestment trusts (R E IT s). • Losses in the foreign-exchange trading markets. • The highly unusual failure of two large banks in 1974, which continued to be a source of gloomy speculation about the industry in 1975. • The relatively high level of loan charge-offs during 1975 for the in dustry as a whole. • Loans to the shipping industry, a part of which was hit by the worldwide recession while in a period of capacity expansion. • Potential difficulties that some de veloping nations might encounter in servicing the debt loads they had ac cumulated. This particular worry now has been extended to include the grow ing East-West trade imbalance and the piling up of import debt by Russia and the Communist-bloc nations. “ W hen we look at the complete rec ord for 1975,” said the Chicagoan, “we see that even with the sizable loan charge-offs last year, the earnings of bank HCs overall continued strong and, in many cases, at a record level. In gen eral, reserves not only absorbed the losses, but actually were increased. Among the 10 largest U. S. bank HCs, the ratio of valuation reserves to loans outstanding at the end of the year was, in every case, larger than at the beginning of the year, even after sub stantial charges to absorb losses. “ Considering all the U. S. commer cial banks in their entirety, we can not help but be impressed by the extraordinary vigor of the banking com munity and the vitality of its earning power. The ability of commercial banks in general to withstand losses of a magnitude experienced only once be fore in our financial history— and to emerge stronger than before— is worthy of far greater note than it has received.” Mr. Anderson pointed out that throughout the recession and the en suing period of slow recovery that be gan in the spring of 1975, the bank ing industry generally maintained an even-handed, statesmanlike posture in dealing with the serious weaknesses in the economy at large as well as in con fronting trying situations within the in dustry that arose out of the earlier zeal for expansion. As for the once-popular concept of growth for growth’s sake, Mr. Ander son said that has been discredited and that the value of impetuous, undisci plined growth in the financial industry is being seriously questioned. This rep resents a significant change in psychol ogy from a few years ago, when the mere fact that an opportunity existed at all was itself sufficient reason to MID-CONTINENT BANKER for December, 1976 LEFT: Pictured during RMA's a n n u a l conference are Southeastern C h a p ter officers and their w ives (I. to r.): C hap ter Pres, and Mrs. M. G . San chez, First N at'l, Pom pano Beach, Fla.; C hap ter V .P. and Mrs. W. E. A yers, Simmons First N at'l, Pine Bluff, A rk.; and C hapter Sec.-Treas. and M rs. G erry U. Stephens, Am erican N at'l, C hattano o g a, Tenn. CENTER: Texas C hapter officers and their w iv e s show n a t conference a re (I. to r.): C hapter Pres, and Mrs. Robert E. O rr, Pan Am erican Bank, B row nsville; C hap ter 1st V.P. and Mrs. Frank A. Sew ell Jr., Peoples N at'l, Tyler; Chapter 2nd V .P. and Mrs. Richard Goebel, reach out for it. Mr. Anderson said that some might say that banks have gone too far in the direction of care fully controlled growth, but he wouldn’t agree, and he thinks most bankers now would rather err on the side o f con servatism. “ In this context,” he continued, “ com mercial banks and other financial insti tutions are placing increased emphasis on asset quality and on strengthening their capita] base. A consequence of this is that future expansion in the near-term will rely much more heavily on internal sources of funds, and the pace of capital spending over the next four or five years is likely to be re strained, thus helping slow overall growth as w e put the recession further behind us.” Mr. Anderson closed with this thought: “ Guided by the sound and prudent judgments of an alert, astute management, we will do well to fol low a course where the landmarks are quality of credit, adequacy of capital, control of costs, forward planning and effective organization. If w e are to be counted at all as an institutional re straint in another outbreak o f inflation and expansion, we must hold fast to these elemental precepts of the bank ing profession.” The President’s Talk. Dan W . Mitch ell, RM A president (president, Old Na tional, Evansville, In d .), also alluded to how banking had become very “ hot press” during the past couple of years. Although most of the articles were negative in nature, he said, he admitted that banks had not exactly covered themselves with glory during those years. He pointed to the numerous ways banks overexpanded, how leverage be came a byword and how bank HCs have becom e an interesting phenome non, as he put it, “ not successful, just interesting!” and added, “ The nonbank ing subsidiaries have absorbed consid erable funds and management time for some very anemic profits, if any.” The industry does have some prob lems, said Mr. Mitchell, and many of those problems arise from unrealistic goals. In some cases, he pointed out, the security analysts' siren song of 15% compound annual earnings growth was, unfortunately, alluring to management, and abnormal risks were undertaken to achieve this unrealistically high goal with rather unfortunate results. Cer tainly, he said, the econom ic impacts of the oil embargo and the recession didn’t help bank lenders, but they weren’t the sole causes. According to Mr. Mitchell, banking’s own manage ment practices must stand some share of the blame, but the magnitude of the problems is exaggerated. Mr. Mitchell, banking’s own manageHe said that net charge-offs were about $3.2 billion in 1975 and prob ably won’t vary too much from that figure in 1976. That amounts to 4.7% of capital, as so many are wont to measure, but he thinks it very signifi cant that net loan losses were com fortably covered by earnings and amounted to only 25% of earnings be fore taxes and charge-offs. In other words, he continued, losses would have to have been four times their size to negate earnings totally and greater than that to erode any capital. Like Mr. Anderson, Mr. Mitchell touched on capital adequacy, saying it has been something of a byword and that he’s not sure he knows what it is. Certainly, he added, it’s not something that can be boiled down easily to a set number or ratio. “ Most of us,” said Mr. Mitchell, “ have discovered in our own lending experience— usually with some discom fort— that capital is no substitute for management. W e have seen what we thought was a solid loan to an ade quately capitalized company get on our problem loan list because of mis management. Banks are in no special category, nor are we insulated from being measured by the same criterion. MID-CONTINENT BANKER for December, 1976 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis T ex as Bank, D allas; and C hapter Sec.-Treas. and Mrs. Raym ond G. Dickerson, Continental N at'l, Fort W orth. RIGHT: M em bers of RMA's Chicago Chapter w ere conference hosts. Committee chairm en from chapter w ho helped plan activities w ere (I. to r.): Phillip L. Bond, LaSalle N at'l; Norm an I. Pickles, conference v. ch., Northern Trust; Jam es M. Brophey, M ichigan A ven u e N at'l; G ilbert G. R ivera, M arshall & llsley Bank, M ilw au kee; W illiam G . Dearham m er, conf. v . ch., First N at'l; Vincent C. Y a g e r, First N at'l, Blue Islan d ; and Kathleen A. Patton, First N at'l. Our capital is no substitute for manage ment either. “ Capital, it seems to me, is more a secondary consideration than the pri mary answer. M uch more important, in my judgment, is the quality o f the man agement— or people adequacy— if you will. This quality of management mani fests itself in a number of ways: reason able liquidity, reasonable growth and, most important, consistently attractive earnings. Earnings, of course, are the key to capital, both as a source of capital by retention of earnings and as an attraction to new capital— both com mon stock or quasi-capital such as sub ordinated notes. Capital markets usu ally do not respond with wild enthu siasm to any business with a weak earnings record; hence, the undercapi talized bank either pays a ghastly price for capital infusion (which has the ef fect of depressing both current and fu ture earnings) or backs off and re mains uncapitalized. Neither result is satisfactory, but the fact remains that capital is the result, not the cause.” Awards. Tw o RM A members were given its highest honor, the Distin guished Service Award, during the con ference. Recipients were Preston T. Holmes, executive vice president, United Virginia Bankshares, Inc., Rich mond, and Robert A. Young, immediate past RM A president and president, Northwest National, Vancouver, Wash. This award is given for outstanding service to the association as a past mem ber of the national board and as a con stant participant in, and contributor to, RM A activities and projects at the na tional and local chapter levels. William L. Marshall III, New En gland Merchants Bank, Boston, won the RM A ’s sixth annual national writing competition. His winning paper, “ESOT as a Financing Vehicle,” was chosen from among papers that had taken top honors in competitions held earlier in the year by several of RM A’s local chapters around the country. Second(Continued on page 26) 19 EFTS (Electronic Funds Transfer Systems) Off-Premises ATMs Shut Down By First Nat'l, St. Louis, Following Court Action ST. LOU IS— First National has dis continued use of its automatic teller machines at two-off-premises locations following the U. S. Supreme Court’s refusal to review a lower court’s deci sion that the bank’s use of these ATM s constituted branching. The BANK24 customer bank communications termi nals (C B C T s) are located at a food store and at Emerson Electric Co., both in north St. Louis County. Clarence C. Barksdale, chairman and CEO o f the bank, said that the bank now will work for new state legislation that will allow banks to operate offpremises CBCTs. In this effort, he con tinued, “we will urge our customers and all Missourians to express their views on this subject to their representatives in Jefferson City. Our restrictive bank ing regulations must be modernized to benefit all customers of Missouri banks.” First National set up the tw o ATM s late in 1974 following issuance of an interpretive ruling by then Comptroller of the Currency James E. Smith allow ing national banks to establish off-prem ises electronic terminals. However, W il liam Kostman, state banking commis sioner, filed suit challenging the legal ity of the two ATMs, saying they vio lated Missouri’s anti-branching law. In November, 1975, U. S. District Judge James H. Meredith ruled that use of such devices not located on banking TIMEOUT! WE MADE THE BIGPLAY BUT SOMEONE BLEWAWHISTLE. First N at'l, St. Louis, is using this new spaper ad to take its case for off-prem ises CBCTs to public, follow ing forced closing of its offprem ises units in St. Louis a re a a s result of u n fa vo rab le court rulings. Ad requests public to contact M issouri legislators and state their case in favo r of permitting such in stallations in shopping centers, grocery stores, office com plexes. Ad also a sks public to call for fa ir competition and equal opportunity for all fin an cial institutions in Missouri. premises was, in effect, branching and illegal under Missouri and federal bank ing regulations. Last August, the U. S. Eighth Circuit Court of Appeals up held Judge Meredith’s decision, and First National sought a review of the decision by the U. S. Supreme Court. At that time, the bank was permitted to continue operating the terminals pending final disposition of the case be fore the High Court. Operation o f First National’s BANK24 units at its main office and Stadium facility in downtown St. Louis and Chippewa Banking Center in south St. Louis is not affected. Account-Information System Automated at Chicago Bank This B A N K 24 ATM at superm arket and sim ilar one at Emerson Electric Co., both in north St. Louis County, have been shut down by First N at'l, St. Louis, follow ing refusal o f U. S. Suprem e Court to re vie w low er court's d e cision that operation of these off-premises CBCTs constitutes branch banking . 20 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis C H IC AG O — Northern Trust has in troduced what it describes as a new, fully automated electronic balance re porting system for correspondent and corporate customers. It’s called “A ccel erated Information Management” or “ A IM .” According to the bank, AIM provides timely and reliable account in formation in a highly flexible manner and replaces a manual reporting sys tem. The bank’s president, Philip W . K. Sweet, says, “ AIM currently makes available 24 categories of account and activity information on a daily basis. Information available includes detailed listings o f wire transfers, commercial deposits, lock-box deposits and chargebacks. Furthermore, the system is de signed to expand as customer needs grow. AIM theoretically could provide as many as 9,999 fields of information.” The bank describes the new service— said to be the first of its kind offered in the Midwest— like this: Customers automatically can receive information by T W X , Telex, magnetic-tape trans mission or Mailgram. Or the customer can access information, using four secu rity codes, by a toll-free-phone request or by a time-sharing inquiry through a computer terminal in the company of fice. The new service employs a national telecommunications firm, National Data Corp. (N D C ). Account information is collected by the bank onto magnetic tape beginning at 2 a.m. each day. Da ta then are transmitted to N D C at 5:30 a.m. for relay to customers at 6 a.m. or any specified time after that (Chicago tim e). Advantages of the system cited by Northern Trust include the capacity to provide the customer with a complete, consolidated report on the firm’s cash position with respect to accounts not only at Northern Trust, but at all of the customer’s banks, and facilitation of daily adjustments in the corporate cash position. New CBCT Regulations Issued; Provide for Applications Under Simplified Procedures W A SH IN G TO N , D. C.— N ew regu lations concerning customer bank com munication terminals (C B C T s) were announced last month by acting Comptroller Robert Bloom. The regulations were published November 3 in the Federal Register as amendments to Parts 4, 5 and 8 of Title 12 of the Code of Federal Regulations and be came effective immediately. The new regulations provide for ap plications, under simplified procedures, by a national bank seeking to operate a CBCT branch in a state where statechartered banks are permitted by statute to establish traditional branches or CBCT branches. State statutory pro visions as to number, location and MID-CONTINENT BANKER for December, 1976 We’ll handle your cards a s if they were our card s. W e can deliver on that promise because w e’re in the banking business ourselves. W e know what the problems are and how to solve them. When you plan to issue plastic cards to your valuable customers, it’s good to know we’ll treat those cards with the expertise and strict security only a company in the banking business can offer. Your order will be custom-designed to fit your needs. We know the problems in a card issue, so we begin by asking the right questions. Once we have all the information, we plan a program specifically for you. A program which reflects your needs and those of your customers. encoding, stuffing and mailing, through housing of files, file maintenance, mass issues and daily plastics production, ACS can do it all for you. Our service bureau concept can turn any card program into a turnkey proposition. Our cost estimates are specific. Everything is itemized and all-inclusive. You know in advance what you’re getting for your money. Our turn-around time is especially short. Our Automated Consumer Services Bureau will handle the entire project. From issuing |L plastics, Jr designing and # printing of 1 forms, embossing And you always get a firm delivery schedule, based on your requirements. W e’re experts at mass issues and daily plastics production. So, whether you plan a mass issue of a new card, a reissue o f an old card or daily issuance of cards on an on-going basis, ACS has the people and the high-speed equipment to get the job done— in 72 hours, or as little as 48 hours in some instances, alter ving the information from you. Total service is only a phone call away. W hether you need a com plete plastic card program designed specifically for you, or simply a secondary card source, American Fletcher’s Consumer Service Bureau provides personalized attention and the land of security you’d expect from a bank. So give us a call, collect: (317) 633-1501. Ask for John Bradshaw or Fred Schorkopf. A M E R IC A N F L E T C H E R N A TIO N A L B A N K AFNB Indianapolis, Indiana MID-CONTINENT BANKER for December, 1976 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 21 capital will apply to national bank CBCT branches. The Comptroller will permit allocation o f capital among branches, traditional or CBCT, within a single city, town or village as he has for traditional branches. In addition, capitalization required for a shared CBCT branch may be shared among the participants. Furthermore, in contrast to the $500 application fee for a traditional branch, the application fee for a CBCT branch is $200. CBCT branch applications must be submitted only for those CBCTs that are to perform functions o f receiving or disbursing funds and that are to be established (i.e., owned or rented) by national banks. Any national bank that already has an operating CBCT branch must file an application within 30 days to obtain ap proval to continue its operation. When two or more national banks share or propose to share a CBCT branch, a single application may be filed by one national bank as agent for the others. Application forms will be available ATM Survey Error A story in the EFTS section of the October issue of M id - C o n t i n e n t B a n k e r on a survey of ATMs con tained an error. The survey— of commercial banks and thrifts— was made by an independent EFTS con sultant, RoseMary Butkovic. The error appeared in the para graph on ATM costs. MCB reported as follows: “ Costs for operating a terminal were pegged at a low of $22 a month for a POS device to $50,000 monthly at an ATM .” What Miss Butkovic’s release on her sur vey results actually said was, “ The cost of a terminal can range from $22 a month for a POS device to a $50,000 ATM .” Obviously, Miss Butkovic was referring to a $50,000 capital investment in an ATM and not a $50,000 monthly rental. The error was called to MCB edi tors’ attention by Jim Lisenbee, manager, product planning, auto mated financial systems, LeFebure Corp., Cedar Rapids, la. In his let ter, Mr. Lisenbee said the cost, as reported by MCB, is very confusing and misleading, and he believes such statistics possibly could misin form financial industry executives who see this article. The editors re gret the mistake. Mr. Lisenbee also questioned Miss Butkovic’s survey results showing the number of transactions per formed by remote electronic ter minals to range from less than 100 monthly at a POS terminal to more than 5,000 a month at an ATM. He said most surveys indicate ATM usage to be up to 15,000 a month. 22 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis shortly from each Regional Adminis trator of National Banks. On December 12, 1974, the then Comptroller, James E. Smith, issued an interpretive ruling expressing his view that CBCTs were not branches. Subse quent litigation resulted in reeision of that interpretation last August 23, and adoption of the regulations announced last month. ChecOKard Banking Centers Go On-Line at Retail Stores In Okla. City's Metro Area O K L A H O M A CITY— ChecOKard banking centers went on-line at 13 C. R. Anthony’s stores November 14, thus beginning the first joint venture in electronic banking for this city’s metro area, say J. W . M cLean and Ray Anthony. Mr. McLean is chairman, Liberty National, and Mr. Anthony, chairman of the retail chain. The new program enables customers of the participating ChecOKard banks to perform most banking services at these initial Anthony’s stores during normal operating h o u r s M o n d a y through Sunday. Using a magnetic striped ChecOKard, customers can make checking-account deposits and withdrawals, savings-account deposits and withdrawals and transfers between checking and savings accounts, as well as pay for merchandise bought. Data processing is being handled by National Sharedata Corp. Liberty Na tional is handling licensing of the ChecOKard name and trademark. Any Oklahoma bank is invited to take part through association w it h N a t io n a l Sharedata. The ChecOKard/Anthony’s electron ic banking program uses an NCR 279 on-line computer terminal in the par ticipating Anthony’s stores, linked di rectly to the customers’ checking and savings accounts at the National Sharedata center. The system eventually will have interchange capabilities with other EFT systems being developed within the state. Social Security Funds Guarantee Announced by Seven Banks in III. PALATIN E, ILL.— Seven banks b e longing to the Suburban Bank Group have announced they now will guaran tee availability o f funds for customers participating in a social security direct deposit program. The system enables recipients of so cial security checks to have their pro ceeds deposited directly by the federal government into the bank o f their choice. The participant banks will guar antee availability of these funds in cus tomer accounts b y 9 a.m. the third bus iness day of each month. Banks that are members of the Su burban Bank Group are Bank o f Rolling Meadows, Cary State, Palatine Nation al, Suburban Bank of Hoffman Estates, Suburban National of Palatine, Subur ban National of Elk Grove Village and Suburban National of Woodfield. According to a Suburban Bank Group spokesman, check recipients in the past have been hesitant to enroll in the direct deposit program, due to the complexity of the social security sys tem. But with the guarantee of funds availability, it is hoped that the num ber of persons taking advantage of the program will grow. Grad School of Banking To Sponsor Investigation O f EFT Cost vs. Benefit M ADISON, W IS.— The Graduate School of Banking, University of W is consin, has announced that it has en gaged the accounting and consulting firm of Peat, Marwick, Mitchell & Co. to design a cost/benefit analysis pack age that can be used by banks to de termine the financial impact o f imple menting EFT services. According to a school spokesman, the package would provide a credible, prac ticable method of performing an E FT cost/benefit analysis, enabling individ ual banks to take an informed approach to EFT. Such a move would impact pricing decisions and marketing plans and could even affect a bank’s profits on the services, he said. The project will be divided into three phases over six months. PMM first will conduct a confidential survey of the financial characteristics of on-going E FT projects: costs and revenue ele ments involved and variables affecting both. The first phase will serve as a basis for extrapolating EFT financial trends and characteristics. An E FT cost/benefit analysis manual will be developed from the survey. It will contain work sheets and step-bystep procedures to provide a banker with means and methods to conduct a financial impact analysis of E FT for his own bank. During the project’s final phase, out lines, case materials and other instruc tional aids will be designed for use in training bankers in E FT cost/benefit analyses. It is anticipated that a com puter-based simulation model will be developed for use by banker-students in preparing projections related to a spe cific market area. MID-CONTINENT BANKER for December, 1976 Are ATMs for Your Bank? These Two Independent Research Studies Can Provide Answers.... Save Your Bank TIME and MONEY i s i js e m o M C Why re-invent the wheel? If you're considering the feasibility of ATMs for your bank, you'll save hundreds of T 1 5 IJ J ® man-hours on research by utilizing these studies created by the First Na tional Bank of Galesburg, III. And you may find that ATMs are not for you, thus saving your bank thousands of dollars of capital investment! The Galesburg bank, incidentally, has a successful track record with its ATM. It has, with its ATM , increased its market penetration of NEW A C CO U N TS from 37% to 56% in a fourbank community! And 16% of new checking accounts and 20% of new savings accounts came from competing banks. P 1 H M 3 B A M I t f S Y A l X A T l O N M A N 13A A *125 HERE’S WHAT IS PROVIDED IN THESE TWO MANUALS Also: newspaper reports of C B C T regulatory rulings . . . a 35-page “ interpretive ruling" by the Comptroller. All valuable information to help your bank reach a pro per decision on ATMs. ELECTRONIC T ELLER PROGRAM INSTALLATION MANUAL In 275 pages, this manual tracks the Galesburg bank's ATM operation through market analysis, cost justifica tion, installation procedures and results. One chapter shows actual samples of supplies used in the program, plastic cards, machine receipts. Another chapter discusses customer identification programs, with advertising used to announce ATM services. Manual recommends HOW to issue user cards. . . per sonnel and department to be assigned responsibility. . . also some do's and don'ts affecting any ATM program. CBCT REPORT TO MANAGEMENT This smaller report summarizes estimated vs. actual results of ATM operations. . , activity reports. . . income and expense items. . . also a seven-year projection of growth of checking and savings accounts originating from ATMs. MID-CONTINENT BANKER for December, 1976 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis M ONEY BACK GU ARA N TEE — If not completely satisfied, return within 10 days for full refund. ] MID-CONTINENT BANKER | 408 Olive St., St. Louis, Mo. 63102 I Please se n d _______ copies of: Electronic Teller Program Installation Manual and C B C T Report to Management Check enclosed * $ ________________ 1 I I J I i I Name __ ______________________________________ Title | 1 Bank ______ Street _ _ City, State, Z ip ____ j _ _ i _______________________ ________ * C h e c k m u s t a c c o m p a n y o r d e r . W e p a y p o stag e an d h a n d lin g . M is s o u ri b a n k s : in c lu d e 4 ’/ i% sale s t a x . 23 Operations Effective M anagem ent Can Be Attained By Following These 3 9 Principles By HOWARD J. BLENDER President Howard J. Blender Co. Dallas 7. Priority. Time available should be budgeted or allocated to tasks in or dered sequence of priority. Otherwise, managers tend to spend time in amount inversely related to the importance of N A recent best-selling novel about their tasks (Parkinson’s Second Law) banking, the author clearly deline (See Pareto Principle No. 9 ). 8. Deadlines. Imposing deadlines on ates the difference between a good yourself and exercising self-discipline manager and a bad manager in his in adhering to them aid managers in characterization of the two executive overcoming indecision, vacillation and vice presidents in his fictional bank. procrastination. The good executive vice president is 9. Concentration. In most areas of likable, tolerant, cool and eventually organized human endeavor, a critical becomes president. The bad vice presi few efforts (around 20%) usually pro dent is curt, intolerant, dull and even duce the great bulk of the results tually jumps off the bank building. (around 80%). This principle is also In the real world, the question of called the Pareto Principle or the 2 0 / what qualities differentiate the effective 80 law. Effective managers concentrate manager from an ineffective one is their efforts on the “ critical few ” somewhat more difficult to answer. But events that will produce the major re on the basis of extensive experience in sults (See No. 3 0 ). bank consulting, my firm has formu 10. Effectiveness Versus Efficiency. lated 39 principles of effective manage Effort, however efficient, will tend to ment: 1. Equal Distribution. No one has be ineffective if performed on the wrong tasks, at the wrong time or with enough time, yet everyone has all there is. This is the great “ paradox of time.” out the intended consequences. Effi It is the one resource distributed equal ciency means doing the job right. E f ly to all. fectiveness means doing the right job 2. Faulty Perception. The manager’s right. Effective action produces maxi mum results with minimum expendi time rarely is spent as he thinks it is. ture of resources, including time. The mind plays tricks on its owner and deceives him into thinking his time is going where it should be going rather "Daily planning, formulated than where it is actually going. 3. Anticipation. Anticipatory action the afternoon before or early generally is more effective than reme the same dayf in consonance dial action. Avoid surprise by expecting with near-term objectives and the unexpected and planning for it. As events, is essential to effective sume if anything can go wrong, it will utilization of personal time (M urphy’s Third L a w ). 4. Planning. The great majority of problems arise from action without 11. Activity Versus Results. Man thought. Every hour spent in effective agers tend to lose sight of objectives planning saves three to four in execu or intended results and to concentrate tion and achieves better results. By fail their efforts on activity. Keeping busy ing to plan, you are planning to fail. gradually becomes their objective. 5. Daily Planning. Daily planning, These managers tend to becom e activ formulated the afternoon before or ear ity-oriented rather than results-oriented. ly the same day, in consonance with Instead of running their jobs, they tend near-term objectives and events, is es to be run by them. They confuse m o sential to effective utilization of person tion with accomplishment, activity with al time. results. 12. Optimum. Results. Results tend 6. Objectives. More effective results generally are achieved by purposeful to be optimized when the greatest bene fits are achieved with minimum efforts. pursuit of planned objectives than by 13. Unrealistic Time Estimates. Man chance. The fundamental concept o f agers tend to take an optimistic view management by objectives is based on o f the time a task will take them to this proved principle. I 24 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis complete. They also tend to think that others will be able to complete their tasks sooner than is likely. Hence, Murphy’s Second Law: “ Everything takes longer than you think.” Thus, managers tend to accept themselves and expect from others unrealistic time estimates. 14. Probability of Occurrence. The probability that an intended event will occur increases directly with the sys tematic application of effort toward its realization. 15. Tyranny of the Urgent. Man agers live in constant tension between the urgent and the important. The ur gent tasks call for instant action and tend to drive out the important from our consciousness. Many managers thus are tyrannized by the urgent and often respond unwittingly to the endless pressures of the moment, neglecting the long-term consequences of more im portant, but less demanding, tasks left undone. 16. Crisis M a n a g e m e n t/ O v e r -R e sponse. Many managers tend to under estimate problems, to fail to anticipate them or to over-respond by treating all problems as if they were crises. This tendency toward crisis management and fire fighting causes undue anxiety, im paired judgment, hasty decision and wasted time and effort. 17. Selective Neglect/ Limited Re sponse. Response to problems and de mands should be realistic and limited to the situation’s needs. Some problems left alone go away. By selectively ignoring those problems that tend to resolve themselves, much time and effort can be conserved for more useful pursuits (also called the “principle of calculated neglect” ) . 18. Flexibility. Flexibility to degree of scheduling personal time may be necessary to accommodate to forces beyond one’s control. Time should not be over- or under-scheduled. 19. Problem Analysis. Failure to dis tinguish symptoms from causes tends to result in wasted effort directed to ward apparent rather than real prob lems. 20. Alternatives. In any given situa tion, failure to generate viable alterna tive solutions limits the likelihood of selecting the most effective course of action. 21. Indecision. Arrival of the point of decision causes many managers with out apparent reason to hesitate, vacil late or refuse to decide. Indecision should be viewed as a decision not to decide. 22. Procrastination. Deferring, post- MID-CONTINENT BANKER for December, 1976 Wfe provide theBestdied collectionservices inthe midwest Here’showwedo it We expedite items hav ing a high dollar value. No special sorting requirements are necessary. □ We make direct presentment at 40 commercial banks and Federal Reserve Bank offices daily. □ We utilize flexible check sort ing routines which can be changed within a 48 hour period. □ We have the ability to analyze your deposits and can recommend the optimum clearing arrangement for you. What can we do for you? Just call or write for our com plete availability schedule. Your Commerce correspon dent will come through for you. as» Commerce Bank _NA o f K ansas City 9th & Main 10th & Walnut 12 th & Charlotte (8 1 6 ) 2 3 4 -2 0 0 0 MID-CONTINENT BANKER for December, 1976 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 25 poning or putting off decisions or ac tions can becom e a habit that loses time, causes lost opportunities, increases pressure of deadlines and generates crises. 23. Com pleted Staff Work. Managers should delegate responsibility and au thority to do a “ whole task.” This saves time otherwise required to complete the task themselves and frees them for more important work. It also enhances the satisfaction their team will take in their work and improves the overall effectiveness of the organization. 24. Delegation/Decision Level. Au thority for decision-making should be delegated to the lowest possible level consistent with adequate judgment and available facts. 25. Upivard Delegation. Managers tend to encourage upward (reverse) delegation unwittingly by fostering subordinates’ dependence on them for answers. They may do this by uncon sciously being “ too ready” with an swers or by instructing subordinates to “ do nothing without checking with me.” 26. Routine/ Detail. Routine tasks of low value to overall objectives should be minimized, consolidated, delegated or eliminated to the extent possible. Managers should divorce themselves from unnecessary detail and selectively neglect all but essential information (See also Exception Management No. 2 9 ). 27. Consolidation. S im ila r tasks should be grouped within division of the work day, to eliminate repetitive actions and minimize interruptions, such as taking and returning phone calls. This will economize utilization of resources, including personal expendi ture of time and effort. 28. Feedback. Feedback on relative performance against goals at predeter mined intervals is essential to ensure progress according to plan. Progress reports should identify problems (d e viations of actual from planned per form ance) in time to take corrective action. 29. Exception Management. Only significant deviations of actual results from planned performance should be reported to the responsible executive to conserve his time and abilities. Re lated to the “ management-by-excep tion” concept is the “ need not to know” concept of excluding all but essential facts. 30. Interruption Control. Arrange ment of controls over activities should be designed to minimize the number, impact and duration o f interruptions. 31. Planned. Unavailability. Man agers must plan periods of uninterrupt ed concentration. The “ quiet hours,” effective secretarial screening of calls and visitors and a hideaway are three 26 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis of the most effective techniques to achieve this. The mistaken notion that managers should “ always be accessible” has led to such abuses as the ever-open door, which stands as a continuing in vitation to passersby and corridorwanderers to drop in for a visit. 32. Visibility. Keeping visible those things you intend doing increases the certainty of achieving your objectives. You can’t do what you can’t remember. This principle of visible control is in herent in such time-management tools as the plan sheet of economics labora tory, daytimer pocket and desk calen dars and project control charts. 33. Clarity. Simple, concise unambig uous language ensures understanding and saves time. 34. Brevity. Economy of words and actions conserves time while promoting clarity and understanding. 35. Habit. Managers tend to be vic tims of their own habit patterns. They tend to take on the practices of the or ganizations in which they manage. Breaking ingrained habit patterns is very difficult and requires continuing exercise of self-discipline. 36. W ork Expansion (Parkinson’s L a w ). W ork tends to expand to fill the time available. 37. Implementation and Follow-Up. Implementation of time planning and follow-up is essential on a daily basis for effective time management. 38. A cceptance. Managers should seek the courage to change those things which can be changed . . . the will ingness to accept those which can’t . . . and the wisdom to know the dif ference. 39. Managerial Imperative. Irre placeable and irretrievable . . . time is the most critical of all managerial re sources. As Ben Franklin put it: “ When your time is up, you’re done.” The ability to organize and utilize time ef fectively is the managerial imperative, for without it, nothing else can be man aged. * # Ways Cl F Used Are Revealed In Harris Bank's Survey O f 64 Major Banks CH ICAG O — A poll taken by Harris Bank of 64 major banks on central in formation files (G IF ) shows that 81% (5 2 ) of those polled have C IF systems that are at least partially computerized, and 30% (1 9 ) are fully computerized. The survey was conducted during July and August and involved banks with deposits of more than $1 billion. Survey responses also reveal that as many as a third of the CIFs include trust customers in addition to personal and commercial customers. Five of the sur vey respondents have no CIF system, but of the other 59, nearly half have systems that carry only account infor mation, and the other half also include “ external” information such as custo mer demographics. The most common ly maintained services in the systems are D D A, savings, installment loans, CDs, charge cards, commercial and mortgage loans. In descending order of popularity, the CIFs store credit information in re gard to the customer’s current balance (61%), credit limit (60%), average bal ance (47%), credit history (32%) and profitability (15%). In general, banks access their systems by name and account number. The ma jority (87%) of systems that are in any way computerized are on-line for access and updating using the cathode-ray (C R T ) for access. The systems are used most often for customer service and balance informa tion, cross-selling services by mail and as a marketing information base. CIF systems are used the least as tools to cross-sell in the lobby. Responding banks indicated overall satisfaction with their present CIF sys tems, with complaints generally stem ming from partial conversions from microfilm a n d /or card files to computer ized systems. Only three (9%) of the banks still in the conversion process have completely integrated systems. Re spondents said their conversion periods ranged from less than 18 months to more than three years. Banking's Stability (Continued from page 19) place winner was John C. McLean Jr., W achovia Bank, Winston-Salem, N. C., whose paper was titled “ Credit Analysis of Life Insurance Companies.” Third prize went to J. A. Spittell III, Na tional Bank of Detroit, for “ The ESOT and ESOT Leverage.” Three mid-Continent-area bankers, all of Chicago, were given certificates of appreciation: Allen P. Stults, who was general conference chairman and is chairman, American National; W il liam G. Dearhammer, assistant vice president, First National; and Norman I. Pickles, vice president, Northern Trust. The RM A Award for Journalistic Ex cellence for 1975 was given to Alford C. Sinclair, president, Atlantic National, Jacksonville, Fla., for his article, “ Prob lem Loans— at the Eyeball-to-Eyeball Level,” which appeared in the June, 1975, issue of RM A’s monthly Journal of Commercial Bank Lending. * * MID-CONTINENT BANKER for December, 1976 When Your Special Problem is Insurance . . . call a SPECIALIST! •n SCARBOROUGH has been solving insurance problems for banks since 1919 . . Isn’t it time you got to know us? Write or call Bob Marshman for a copy of Scarborough’s Handbook of Bank Insurance. Scarborough th e b a n k in s u ra n c e p e o p le S c a rb o ro u g h & Com pany 222 N. D earborn Street • C h ic a g o , Illin o is 60601 (312) 346-6060 MID-CONTINENT BANKER for December, 1976 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 27 M o rtg a g e L e n d in g Advantages of M ortgage Lending By Banks Cited by Fannie M ae H A T ’S THE sixth largest corpo ration in the United States? It’s the Federal National Mortgage Asso ciation (F N M A or Fannie M ae), a $32-billion-asset privately owned, gov ernment-chartered corporation. Its ob jective is to aid the mortgage market by providing capital for mortgage loans when the supply of funds is lim ited from other sources, such as deposit institutions. A measure of Fannie Mae’s impor tance as a private corporation is the level of its financing activities. In the 1971-1975 period, FN M A purchased a total of $25.5 billion in mortgages; during that same time, it borrowed $55.9 billion. Thus, FN M A ’s financing operations are on a rather substantial scale. In almost all years, it’s the larg est borrower in the country outside the United States Treasury itself. FN M A officials believe that the con sumer market, particularly the housing market, is one in which commercial banks could, through an association with FNM A, becom e more actively in volved, to their financial benefit and the benefit of their communities. Several years ago, FN M A points out, it might have been understandable why banks consistently gave a cold shoulder to mortgage lending. There was, it seemed, no reason for them to lock up their money for a long period of time at a few points over prime when al W ternative investments would allow them to roll those funds over to achieve greater earnings. This rationale, however, says FNM A, is no longer appropriate because the existence of an effective, nationwide secondary market, maintained by the corporation, makes it possible for pri mary lenders to roll over their mort gage investments as fast as or faster than they can other investments. In deed, a bank can be guaranteed pur chase of a mortgage at a specific yield by FN M A in the secondary market even before it makes the mortgage loan final. Many banks that still have mortgage lending on their “ unwanted list” may be turning away people who might well becom e their best customers— prospective home buyers, FNM A warns. Those banks are sending poten tial customers to competing institutions that will grant them the mortgage cred it they need. W hat’s frequently over looked, however, is the possibility that once the mortgage loan applicant is turned down and sent elsewhere, he may not come back. He may go to an other institution for his new checking account, his new savings account, his retirement account, his installment loan on a new car and maybe even a busi ness account. One of the first things a new family does when it moves into a new area is buy a home. That family’s first contact (Dollars in Thousands) State Total « of homes purchased as of 12/31/75 State portfolio as of 12/31/75 Conventional FHA/VA Project # active FNMA servicers First quarter 1976 purchases Illinois 60,947 $1,218,904 $ 38,131 320,595 66 $ 7,459 Indiana 60,025 872,901 63,678 605,923 203,300 51 4,359 Kentucky 22,038 313,800 12,715 214,810 86,275 12 286 Tennessee 49,511 750,909 78,848 553,175 118,886 37 3,445 $ 860,178 $ Alabama 39,568 636,217 64,922 517,150 54,145 22 1,108 Mississippi 22,302 319,827 26,697 220,047 73,083 25 1,938 Louisiana 51,150 837,904 82,452 638,182 117,270 33 3,141 Arkansas 19,257 277,232 19,430 188,597 69,205 29 285 185,062 2,701,860 385,500 1,916,048 400,312 147 14,654 New Mexico 23,472 318,652 32,468 238,612 47,572 20 2,078 Oklahoma 49,335 652,323 34,829 519,766 97,728 32 2,084 Texas Kansas 16,599 191,025 6,610 141,607 42,808 25 941 Missouri 28,209 406,631 9,273 281,687 115,671 43 4.258 627,475 $9,498,185 $855,553 $6,895,782 $1,746,850 542 $46,036 Total 28 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis with a financial institution, then, would come when it applies for a mortgage loan. In FN M A ’s opinion, this also would be the first— and the best— op portunity for a bank to capture a cus tomer for its other financial services. Moreover, says FNM A, increased commercial bank activity in the pri mary and secondary mortgage markets could be helpful to many small and mid-sized communities. Because lend ers who work with Fannie Mae can be assured a market outlet for either gov ernment-backed or conventional lowdown-payment loans, many young fam ilies who otherwise could not afford a home may becom e homeowners, con tributing to the social and financial health of their communities. Both the banks and their communi ties also would stand to benefit from new business or industry that would be attracted to areas where adequate mortgage credit is available for their employees. In essence, what all this means, ac cording to FNM A, is that active par ticipation in the primary and secondary mortgage markets can have a favorable financial impact on a commercial bank. A well-planned mortgage origination, selling and servicing operation holds out a significant potential for profit. Expanded Profit Potential. Profit is perhaps the most obvious advantage of a bank’s association with FNMA. The bank that’s an FN M A seller/ser vicer can roll over its mortgage loans as soon as they are originated so that its mortgage lending can becom e an in tegral component of its overall opera tions, moving with the market as do other short-term investment activities. Even more important, additional earnings are generated in the form of loan-origination and loan-servicing fees. (Loan servicing currently is set by FN M A at /8% of the outstanding prin cipal balance.) A continuous mortgage lending operation can, then, generate a steady source of income. Broader Lending Services. In addi tion to providing the bank with in creased liquidity and greater sources of income, participation in the sec ondary market gives the commercial banker a fuller range of lending op tions. FN M A will buy F H A /V A or conventional single-family home mort gages as well as individual mortgages in planned unit developments and con dominiums. It also will purchase FHA project mortgages and participate with a commercial bank in construction lending. What’s more, Fannie Mae’s conven tional program enables a commercial bank, or other primary' lending institu tion, to obtain prior approval of credit MID-CONTINENT BANKER for December, 1976 Associates and banks: financial partners, creatively working ° ° Every day, there’s an opportunity to work with Associates. C all us for inform ation. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis .= ' t ; $ Associates Commercial Corporation 55 E. Monroe Street Chicago, Illinois 6Q603 (3 1 2 ) 781-5888 - J P A sub^^iary of Associates Corporation of North America, a G i l + Western Company. I and property even before a mortgage loan is closed, assuring the bank of a subsequent takeout. FN M A also offers an approval certificate program for condominiums, PUDs and subdivision projects that facilitates expeditious sec ondary market sale of individual mort gages within those developments. Un der none of these programs is the bank required to deliver the loans. But FN M A stands ready to purchase them. Best of all, says FNM A, it’s in the market at all times, regardless of the economic climate. Indeed, it is this as pect of Fannie Mae’s secondary mar ket operations that most enhances the primary lender’s opportunity to fulfill its own portfolio needs and serve the mortgage demand of its community. FN M A is always there. In fact, Fannie Mae becomes most active when pri mary lenders need it most— when cred it tightens. Marketability and Professionalism. Standardization of mortgage forms, which has been brought about through efforts of Fannie Mae and the Federal Home Loan Mortgage Corp., has made it a great deal easier to conduct busi ness in the secondary market. There are today uniform mortgage instru ments for every state in the nation, standard appraisal forms and uniform residential loan applications. In addi tion, FN M A has fostered development of nationally recognized underwriting criteria. Each of these developments has con tributed substantially to increasing the attractiveness and value of individual mortgage loan portfolios and, conse quently, to effective operation of a na tionwide secondary market. The higher and steadier volume of mortgage business that results from ac tive participation in the secondary mar ket also should result in increased pro fessionalism among bank staffs. Be cause staff levels do not have to fluc tuate constantly with erratic changes in the mortgage market, competent, professional employees can be attracted and retained. Benefits of maintaining such top-level teams obviously carry over into a bank’s outside business re lationships. And, as indicated at the outset, an active professional mortgage lending operation can provide a forceful com petitive tool. Not only can it help at tract new customers initially, but it can, through the servicing function, provide the vehicle for maintaining a regular line of communication between the bank and its customers. Competitive Edge. Fannie Mae is committed to its conventional program and is eager to establish a strong, work ing relationship with commercial banks 30 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis around the country. This means that if a bank became an FNM A-approved seller/servicer to day, it could offer the qualified con sumer who walks in tomorrow a con ventional mortgage with as little as 5% down, thereby, in all likelihood, gain ing a new customer for its other “ full service” products as well. It could do this knowing that FNM A will purchase the mortgage and pay the bank a %% servicing fee until the loan is paid off. FN M A has this advice for bankers: In today’s world of increasing competi tion among financial institutions and growing sophistication among their consumer customers, this kind of ag gressive and affirmative move into mortgage lending, using the secondary mortgage market, could provide many commercial banks with a significant competitive edge, while simultaneously benefiting their communities. * * For more information regarding the Fed eral National Mortgage Association and its mortgage market programs, contact O f fice of Corporate Relations, 1133 15th Street, N. W ., Washington, DC 20005, (tel.) 202/293-6057. Home Mortgage Lending Rises In South Central U. S., Based on MGIC Information Privately insured home mortgage lending in the South Central United States ran more than 23% ahead of last year for the first nine months of 1976, based on loan insurance applications processed by underwriting offices in Mortgage Guaranty Insurance Corp.’s (M G IC ) South Central division, head quartered in Houston. This division serves 2,307 home mortgage lenders which make insured loans in Texas, New Mexico, Oklahoma, Kansas, Mis souri, Arkansas and Louisiana. “ Through September,” says Granvel Smith, vice president and South Cen tral division manager, “ application vol ume totaled $1,065 million, compared with $876.4 million for the same period a year ago.” South Central U. S. lenders have made $6.31 billion worth of M GICinsured loans since the firm started doing business in that seven-state area in 1958. Currently, there are 182,266 MGIC-insured loans in the combined mortgage portfolios o f South Central lenders. According to Mr. Smith, lend ers in those states have received $11.3 million in claims payments since M GIC began doing business there. However, 63% of that amount— $7.1 million— has been paid since January 1, 1974. Mr. Smith notes the growing dollar amount of loss per claim, resulting from the higher dollar amount of mortgage loans now being insured and the in creased coverage offered lenders on 95% loans. M GIC’s average loss per claim, he points out, has risen from $2,477 prior to 1974 to the current figure o f $3,590 through September. The average interest rate in September on the high-ratio insured loan was around 9%, and it has dropped slightly since then. Reporting Aid Offered For Redlining Act Compliance A system to enable lenders to deal with the complex reporting require ments of the Federal Home Mortgage Disclosure A ct of 1975 is being offered by the Reuben H. Donnelley Corp. The new Donnelley Bancode Census Tract Coding Directory is said to elimi nate the difficulties banks and thrifts face in deciding how to add the re quired census tract numbers to their records. The directory was developed in consultation with various regulatory authorities and lenders to help non exempt lending institutions comply with the provisions of the act by Sep tember 30, the date the first disclosure is due. The regulation requires certain de pository institutions to disclose public ly where new mortgage and home im provement loans are made by census tract. The requirement applies to Stan dard Metropolitan Statistical Areas in which a bank or thrift maintains head quarters or a branch. Software System Developed For Anti-Redlining Reports A software system package that sup plies financial institutions with the pub lic disclosure information required by regulatory agencies is being offered by Florida Software Services, Orlando, Fla., as a solution to compliance with anti-redlining statutes. The system can deliver information needed for reporting b y individual SMSA regions or by in-depth reporting on census tracts, the firm says, via its Mortgage Loan Extended System (M L X ) software system package. Re porting is done automatically as part of the normal capabilities of the M LX system. According to Florida Softwares, the reports produced by the M LX system zero in on summary total, the number of applications received for mortgages, amounts applied for, number of mort gages made and purchases of existing mortgages from other financial institu tions or investors. MID-CONTINENT BANKER for December, 1976 THESE GUYS WON’T LEAVE WELL ENOUGH ALONE. Joe Blank, Mike Miller and Ron Deal. It seems they have a couple of key phrases that work consistendy well. For us, ana our corre spondent banking friends. They go like this: What if? Why don’t we? Why not try this? (and) I wonder why nobody else thought of that? We didn’t get to be the largest bank in the state by offering you the same tired solutions over and over again. We keep it loose. Because every bank, ana every banking problem, are MID-CONTINENT BANKER for December, 1976 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis unique. And we’re flexible enough to find the best solution for you. Because we’ve got people who won’t leave well enough alone. Call us toll free. In Tennessee, 1-800-342-8240. In other states, T800-251-8514. « First Am erican First American Center, Nashville 37237 FirstA m tennBankg roup Member FD1C Installment Lending Bank s Installment Loan Promotion Scores W ith Shake O ur M oneytree Theme OME SHAKE Our Moneytree” v J was the invitation made to resi dents of the Cincinnati area by Southern Ohio Bank. And many citizens did just that by taking part in the bank’s suc cessful installment loan promotion. When the campaign was introduced, demand by consumers for installment loans was light, bank officials said. The institution, they noted, was in a heavy position with respect to time deposits and it was the bank’s desire to convert those time deposit dollars to installment loans. Advertising was begun, using a jingle and copy for radio that played up the campaign. An animated 30-second tele vision commercial also was employed. The area was saturated with outdoor billboards showing the promotion’s em blem, a tree having currency instead of leaves, and bearing the “ Come Shake Our Moneytree” catchphrase. In the bank lobby, a full-size bill board was erected, while counter dis play posters, counter cards and pres sure-sensitive tellers window stickers also were used. The campaign was cross-sold through statement stuffers and tellers change-envelopes. Bank officials were extremely pleased with the results of the promotion. “ It attracted many installment loan cus tomers who normally would have gone Bank Is Investment Adviser In New Orleans Project Huge outdoor billboard advertising Southern Ohio Bank's installm ent loan promotion w a s hung inside bank to add unique aspect to m arketing effort. From I. are Leonard M. Sive, Sive Associates ad agency, and Tom Dix, bank pres. to other institutions,” a Southern Ohio Bank spokesman said. “It more than met its overall goal of generating cus tomer awareness and added a little spice to our installment loan program. In addition, the ‘Come Shake Our Moneytree’ c a m p a i g n provided an identity on which future loan pro motions could be based. “Although customer awareness began slowly,” the spokesman added, “it had picked up significantly by the time the ‘Moneytree’ promotion had begun to wind down. Therefore, the campaign was allowed to run longer than origi nally planned.” Bank Sponsors New C ar Show This m ay look like an auto dealer's lot, but it's really First N atio nal, Liberty, Mo. The bank sponsored a show ing of 1977 cars at the parking a re a of its C rossroads Motor Banking Fa cility in the C rossro ad s Shopping Center in Liberty. Local new car dealers contributed vehicles during the tw o -d ay show . A rea residents thus had an opportunity to exam ine vario us m akes a ll in one place and to talk w ith d ealer representatives. 32 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Bank officials state that they knew the program had met its objectives of providing an identifiable image for the installment loan department and raising customer awareness when the program was used as an example in a local tele vision station’s editorial! * * Citibank of New York City is acting as investment adviser to Bank Omran of Teheran, Iran, in a project the Iran ian bank is participating in in New Or leans. The project is a joint venture with Joseph C. Canizaro Interests of New Orleans to develop a $500-million multi-use complex in that city. The Canal Place project will be constructed on a 23-acre site bounded by the Mis sissippi River, Canal Street and the historic French Quarter. Citibank is represented on the man agement board of the Canal Place ven ture by James M. Trucksess Jr., vice president, direct placement department, investment management group. Canal Place will contain three office towers with approximately 2.5 million square feet of office space. Plans call for a 500-room hotel, an additional 300room hotel, a one-million-square-foot retail center, living units including townhouses and apartments and a wa terfront section incorporating a cruise terminal and a restaurant-entertainment complex. Risk/lnsurance Management Guide Available to Bankers From ABA W ASH IN G TO N , D. C.— To help bankers implement an effective risk and insurance management program, the ABA has published a Risk and In surance Management Planning Guide for Financial Institutions. The publication is structured in easy-to-follow steps toward providing a banker with an increased ability to protect a bank’s assets from accidental and criminal loss and to minimize pre mium costs. There are more than 25 practical and proved worksheets, guidelines and procedures, tested by bank risk managers, in the areas of: in troduction to the risk management pro cess, exposure identification, risk evalu ation, risk control, risk financing and insurance and risk and insurance man agement administration. Copies are available to ABA mem bers for $17.50 and to nonmembers for $22. Write: ABA Order Processing, 1120 Connecticut Avenue, N. W ., Washington, D C 20036. MID-CONTINENT BANKER for December, 1976 WFUGIVEYOU*2,000 FORn. It may be a piece ofjunk to most people, but you’ve got a loan on it that has $2,000 left to be paid. And, worst of all, the borrower never bothered to tell you the car was uninsured. Well if you have Lender’s Protective Insurance (what we call Banker Single Interest Insurance) from National Union, you’ll get your money. You’ll even be paid for the investment you made in finding the car, and towing it away. The same people who take care of most of your other insurance needs are offering you this kind of protection: National Union. A company already providing Directors and Officers Insurance, Pension Trust, Fidelity and Surety Bonds, SEC Liability and other credit-related services. National Union can offer you the kind of professional expertise and financial stability that all lenders need. The resources of a Best’s A+AAAAA company plus the creativity that comes NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH. PA. with years of experience. E Dept. 540-612-85, 102 Maiden La., New York, N.Y. 10005 For more information just fill in I Please send me more information about Lenders Protective Insurance. the coupon. And find out how to make I Named: Title sure your collateral is worth what it’s E Company supposed to be worth. We welcome inquiries from any I Address I licensed agent or broker. You don’t I have to be a regular producer to A m place business with an AIG company. L A M em ber Company of American International Group MID-CONTINENT BANKER for December, 1976 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis ! |j I I I I J BANKING WORLD monitor activities of interest to inde pendent banking at other federal agen cies, such as the Federal Home Loan Bank Board and Federal Trade Com mission. Mr. Jolly formerly was assist ant state legislative counsel for the ABA. • Leon Jaworski, Watergate special prosecutor, was elected chairman, Southwest Bancshares, Inc., Houston, last month. John T. Cater was elected president and CEO. Forrest S. Warren, who was chairman and CEO, resigned because of the time demands of per sonal and business investments. Hubert Gentry Jr. and Robert Stewart Jr. were named to the new posts of vice chair men. Mr. Jaworski, senior partner of the law firm, Fulbright & Jaworski, has headed the American Bar Association and American College of Trial Lawyers. He became a director of Bank o f the Southwest, lead bank in the HC, in 1958 and was an organizing director of Southwest Bancshares. He resigned in 1973 to becom e Watergate special pros ecutor, was reelected to both boards in 1974 and has been on both executive committees. Mr. Cater is president, Bank of the Southwest, and a director of both boards. Mr. Stewart is vice chairman of the bank and has been an officer and director of the HC since 1970. Mr. Gentry was named HC presi dent earlier this year. • John W . Rowe has joined Chi cago’s American National as vice presi dent and manager of its bond depart ment. Mr. Rowe formerly was vice president and manager of the munici pal bond section of First National, St. Louis, which he joined in 1967. He be gan his career as a municipal bond salesman and subsequently a municipal bond trader at Stifel Nicolaus & Co., Inc., St. Louis. • Mason G. Alexander, senior vice president, Citizens & Southern National, Columbia, S. C., is the new president of the Consumer Bankers Association. He succeeeds Paul L. Stansbuiy, senior vice president, Valley National, Phoe 34 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis nix, who was elected to the CBA’s board of governors and executive com mittee. Other new officers are: first vice president— James L. Smith, senior vice president, Security Pacific Na tional, Los Angeles; and second vice president, Charles F. Patterson Jr., group vice president, Trust Co. Bank, Atlanta. Mid-Continent-area bankers elected to the board o f governors are: Glenn Hodges, senior vice president, First National, Memphis, and Thomas J. McClain, vice president, National Bank o f Greenwood, Ind., to three-year terms; and Dan Lacy, president, Cen tral National, Oklahoma City, to a oneyear term. • Bruce O. Jolly Jr. has joined the Independent Bankers Association of America as federal administrative coun sel. His primary responsibility in the newly created post is to act as liaison between the IBAA and the FDIC, Comptroller and Fed. He also will Farm Credit System Book A history of the Farm Credit Sys tem has been put together in a book called “ The Farm Credit System, a History of Financial Self-Help.” The author is W . Gifford Hoag. The 292-page, hard-cover book describes the Farm Credit System and then goes on to discuss its sig nificance to farmers and the econ omy, pioneering innovations, basic principles and major guidelines, working relationships with other or ganizations and groups and farm ers’ needs for credit. In addition, the book contains a summary and bibliography, a look to the future and such information as Fami Credit Administration gov ernors through tlie years and presi dents of Farm Credit banks. • William J. Murphy has joined the Bank Marketing Association, Chicago, as director, communications depart ment. He formerly was public relations director, Bank Administration Institute, Park Ridge, 111. In his new post, Mr. Murphy is responsible for planning, developing and implementing the BMA’s extensive communications and publications programs. He also is liaison to Dr. James L. Faltinek, vice presi dent and director of the BMA’s asso ciation services division. Bror W. Unge Dies Bror W . Unge, consultant to the in t e r n a t io n a l department, United M is s o u r i B an k , Kansas City, died October 24. A na tive of Stockholm, Sweden, Mr. Unge joined the bank in 1944 as m a n a g e r of its foreign de partment and was responsible for establishing and de veloping the department, later renamed the international department. Accord ing to United Missouri, Mr. Unge was the first person with international trade and business experience to run such a department in a Kansas City bank. He became a.v.p. in 1957, retired in 1961, but remained as a consultant. Mr. Unge, who spoke six languages, was ap pointed French consul and trade com missioner for Missouri in 1957 and held several executive posts in the Kansas City consular corps, of which he had been dean. He received several foreign decorations. 88 , MID-CONTINENT BANKER for December, 1976 AiiIncentiveProgram you'll find hard to refuse What should motivate your new accounts people to do a good job? Gifts or pre miums as a reward? Or the re warding experience of knowing they have developed a satisfied customer. Well, we feel the best incentive program for them should begin with the c u s t o m e r . After all, it’s the customer who seeks out your services. Or look at it this way : a s a t i s f i e d cus tomer is one who is treated with the respect of a personal choice in the check selection process. A happy customer, in turn, helps reinforce a check counselor’s self-image. And both of them benefit. MID-CONTINENT BANKER for December, 1976 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis We have some tools to help you in this effort. Two training films plus a little help from our Sales Representa tive can give you a start in build ing incentive for your check counselors. It’s pretty basic stuff. A little old-fashioned marketing philosophy that still makes a lot of sense. Little things m ake a big difference. C H E C K PRINTERS, IN C SALES HEADOUARTERS P 0 BOX 3 3 9 9 ST. PAUL M N 551 65 STRATEGICALLY LOCATED PLANTS FROM COAST TO COAST Corporate News Roundup * Doane Agricultural Service, Iuc. Jan Hotze has been named account supervisor, Doane Agricultural Service, Inc., St. Louis. In this post, she acts as sales representative for Doane’s Fann ing for Profit, a monthly agricultural newsletter sent by banks to their farm customers. Her efforts are concentrated in six states, including Missouri and Kansas. H OGU E HOTZE • Citizens Fidelity Leasing Corp. This Louisville-based firm has opened a Nashville office, with Ronald O. Hogue as vice president and manager. He will be assisted by Wilson L. Cross, who joined the leasing firm in 1975 after serving as the Nashville repre sentative of U. S. Leasing Corp. I /2 years. Mr. Hogue formerly was with Third National, Nashville, as vice presi dent and a corporate lending officer calling on accounts in the Southeast, Southwest, Midwest and Northeast. The new leasing office’s staff also includes Ted K. Stirgwolt, the leasing firm’s Indiana representative based in Indi anapolis. The leasing firm is operated by Citizens Fidelity Corp., Louisville. • Associates C o m m e r c ia l Corp. Charles E. Honess has been appointed regional vice president of the industrial division, Associates Commercial Corp., Chicago-based c o m m e r c ia l financing subsidiary of Associates Corp. of North America, a Gulf & Western company. Mr. Honess is responsible for develop ment and expansion of financing and leasing sales and development and supervision of regional sales offices in eight states, including Illinois. • Christmas Club a Corporation. Thomas G. Rigney has been named regional sales manager, Christmas Club a Corporation, Easton, Pa., with market ing responsibility for the midwestern 36 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis and mid-Atlantic states. He has had marketing m a n a g e m e n t posts with Rudco., Inc., Olvmpia International and Xerox Corp. • Chandler Leasing Corp. W ilbur J. Morgan has been named regional man ager in Dallas for a five-state area by Chandler Leasing Corp., a wholly owned subsidiary o f Walter E. Heller & Co. Mr. Morgan was national sales and marketing manager o f Borg-Warner Acceptance Corp.’s equipment division. His 15 years’ experience in industrial equipment leasing and financing in cludes several posts at Commercial Credit Equipment Corp. Based in Dallas most of those years, Mr. Morgan most recently was regional sales vice presi dent for all CCEC operations in this fivestate area. • M GIC Investment Corp. W . Ed ward Berger has been named manager of communications for MGIC Invest ment Corp., Milwaukee. He was with the corporate relations staff of Federal National Mortgage Association in W ash ington, D. C., four years. Most recently, he was assistant to the FN M A’s chair man and president. In his new post, Mr. Berger is responsible for external media contacts and information pertaining to M G IC’s mortgage guaranty insurance, commercial loan insurance and direc tors and officers liability. • Mortgage Guaranty I n s u r a n c e Corp. Thomas S. LaMalfa has been named coordinator-secondary market services, Mortgage Guaranty Insurance Corp. (MGIC), Milwaukee, where he is based. His duties include maintaining information services used by investors and purchasers o f conventional loans in the secondary market. writers Laboratories-listed lock. Door frames also are frosted black alloy. Se curity’s new Satellite II vault door is finished in frosted black leathertone with stainless steel front and back ac cess panels and stainless steel box trim. The firm points out that stainless steel plates are employed at the point of contact between the full-length locking bar and doorjamb to provide maximum durability, and two four-tumbler key changing combination locks are pro vided with spy-proof dials finished in black. Each lock has a UL relocking device. The under-counter equipment, available with stainless steel drawer fronts and frosted black cabinets, is available either in the “ highboy” (38/2 inches) or “low boy” (31/f inches) series. Write: Security Corp., 2055 S. E. Main St., Irvine, CA 92714. • L e F e b u re . L eF eb u re, C edar Rapids, la., has introduced safe deposit boxes with new Series 7300 locks. A c cording to the manufacturer, these locks are pickproof and the tumblers es pecially designed so that it’s impossible to insert a renter’s key until the guard key has been operated. More than New Products and Services • Security Corp. A new series o f safe deposit boxes, vault doors and under counter equipment has been introduced by Security Corp., Irvine, Calif. The D X series, featuring contemporary de sign and precision engineering, features polished stainless steel components and frosted black trim and accents. On the D X boxes, a plate of satin-polished 18-8 stainless steel is recessed into the frosted black alloy door mechanically fastened behind the KD-73 Under- 275,000 key changes are possible. These locks, which may be mounted in polished steel, satin nickel or jiggered nickel doors, are available with a double littlenose configuration or, by special ar rangement, with a double big-nose or a big-nose-little-nose configuration. In all cases, hard nickel silver keys are standard. Write: L e F e b u r e , Cedar Rapids, IA 52406. MID-CONTINENT BANKER for December, 1976 DEPOSIT GUARANTY'S CORRESPONDENT BANK TEAM: (Left to right) Bill Lloyd, vice president; Jim Crawford, assistant vice president; Joel Varner, vice president; Barney Jacks, senior vice president and department manager; Don Noblitt, Jr. (corporate and bank services representative); and Ed Keeton, assistant vice president. All the Expertise You Might Need in One Room. At Deposit Guaranty we have put together a Correspondent Bank Team that can handle virtually any problem, any request that you might have. As always, this group has available to it the additional expertise of the various other specialized divisions and departments of Mississippi’s largest and strongest financial system . . . but most of the answers can be found right here in this group. Should you or any of your customers have need for our services in Mississippi we invite you to contact the Correspondent Bank Team member serving your area. Bill Lloyd Northwest Mississippi & Arkansas Joel Varner Southeast Mississippi & Southwest Alabama Jim Crawford Southwest Mississippi & Louisiana Ed Keeton Northeast Mississippi, West Tennessee & Northwest Alabama DEPOSFT GUARANTY NATIONAL RANK Grow With Us/Jackson, Miss./Member F.D.I.C. MID-CONTINENT BANKER for December, 1976 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 37 W hy banks suggested A tn a M oney for b rkks in M innesota and light dim m ers in Texas. When construction slowed down, so did sales for a brick wholesaler. But when business picked up, the wholesaler needed funds for more inventory. His was reluctant to raise his credit line without professional inventory control. Solution? /Etna Money.SMWorking with the bank, we provided a financing package secured by accounts receivable and inventory. We also set up the proper controls to monitor the inventory. Result? The wholesaler quickly doubled his sales, and earned continued increases in his credit line. The bank kept an active and appreciative customer. To stay competitive, the manufacturer of light dimmers had to expand his product line. But he was also having temporary financial difficulties, so his bank was unwilling to increase his credit line. Solution? /Etna Money. With the bank partici pating, we provided a financing program collateralized by inventory and receivables. Result? The manufacturer expanded his product line, his sales, and his business with the bank. /Etna Money. It’s flexible and quickly available for your customers. It’s a workable alternative for you. Call us for details. You get action with /Etna because our business is /Etna Business Credit, Inc. to help your business. ■ One of the /ETNA LIFE *StCASUALTY companies 200 W est M onroe Street, Chicago, IL 60606 (312) 782-6189* O n e Main Place, Dallas T X 75250 (214) 651-0361 •O ne A llen Center, Houston, T X 77002 (713) 658-0349 •2022 Powers Ferry Road, Atlanta, G A 30339 (404) 436-5158 38 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis MID-CONTINENT BANKER for December, 1976 Commercial Finance/Bank Participation Loans: A Different Approach! By ERIC L STONE, Vice President, Wachovia Bank, Asheville, N. C., and RICHARD J. DORGAN, Senior Vice President, James Talcott, Inc., Atlanta O O PERATIN G in financing borrow ers who might not meet traditional standards for commercial bank credit is fairly common practice for banks and commercial finance companies. These arrangements are usually administered under the terms of a participation agreement between the bank and the commercial finance lender. Briefly, this agreement provides for the bank’s purchase of a portion of a loan which is extended and adminis tered by the commercial finance com pany. The loan is a secured transaction, perfected under the provisions of the Uniform Commercial Code. Collateral usually includes accounts receivable and inventory and— in some cases— machinery, equipment and real estate. This type of arrangement can have certain advantages for all parties. For the borrower, the primary advantage is a reduced over-all cost of borrowing, since the interest rate charged by the bank will frequently be lower than that of the commercial finance company. The bank’s direct charge on its share of the loan can sometimes be lower b e cause the borrower’s deposit balances are taken into consideration by the bank in establishing the interest rate. Also, less administration is required by the bank. For the bank, this method of fi nancing provides an opportunity to participate in the financing of a com pany that may offer good long-range potential but which presently does not qualify for sufficient conventional com mercial bank credit. For instance, the company’s borrowing needs may be continuous and collateral-dependent for one reason or another. In such cases, the commercial finance company can provide the expertise and administra tive capability that enables a bank to participate in this type of loan. By participating in the loan, the bank C STONE can establish itself in a good position to be the principal banking connection for the borrower, and perhaps to take on all the company’s needs once it “ graduates” from the commercial fi nancing arrangement. Also of benefit to the bank is the fact that total yield should be higher than normal, since the risk aspects require an interest rate higher than prime as well as a deposit relationship. Another advantage for a bank can arise when the total amount of credit needed by the borrower presents a lending-limit problem— the limitation can be eliminated by sharing the loan with a commercial finance company without introducing another bank into the company’s financial picture. From a commercial finance com pany’s standpoint, bank participation arrangements are desirable from a newbusiness aspect. Many times banks will determine that they are not able to lend to a particular company except on a secured basis under which the col lateral is carefully administered. In such case, they can call in a commerThis article is reprinted with permis sion from the September, 1976 issue of T h e Journal of Com m ercial Bank Len d in g , publication of Robert Mor ris Associates, headquartered in Phila delphia. MID-CONTINENT BANKER for December, 1976 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis DORGAN cial finance company, thereby provid ing new-business referrals for the com mercial finance company. With existing account relationships, a participation arrangement can be at tractive to the commercial finance com pany from a competitive pricing stand point. In these circumstances, partici pating out a portion of the loan at a lower rate will reduce the overall cost to the customer. Other advantages may include reduced funding requirements and limiting total exposure in any one account. The above description of the bankcommercial finance company participa tion arrangement is fairly general. There are many other points that might be highlighted but, for purposes of this discussion, a general description should suffice. The principal issue to be con sidered here is the manner in which these arrangements are documented, particularly as related to the creditors’ (bank and commercial finance com pany) access to the borrower and the collateral. It should go without saying that every lender should approach extend ing credit on a participation basis just as it would with any other prospect. That is, the company, its management, financial condition, trends and the in dustry and economic conditions should be thoroughly analyzed and evaluated. W hen both parties have determined from this analysis that they are willing to extend credit, the commercial finance company does a further investigation and thorough analysis of the underlying collateral to determine its quality and whether it is sufficient in amount to provide the borrower the funds nec essary to attain its objectives. For the most part, the bank relies entirely upon the commercial finance company’s eval uation in this area. Once this audit is completed and the 39 D ifferent Approach (Continued) credit is approved, the various financing agreements, security agreements and fi nancing statements are executed be tween the borrower and the commer cial finance company. Finally, a partici pation agreement is executed between the bank and commercial finance com pany as evidence of the bank’s position in the loan agreement. Herein lies the point for discussion. All executed documents concerning the obligation of borrower to lender and the perfection of the security in terest in the collateral run between the borrower and the commercial finance company. There are normally no threeparty agreements (borrower, bank and commercial finance com pany). In most cases, the only document that evidences the bank’s involvement is the participa tion agreement executed between the bank and commercial finance company. Some of the areas covered in the par ticipation agreement are the amount (an absolute maximum and a percent age of the total) of the bank’s partici pation, the handling of each partici pant’s advances and payments, the in terest to be paid each participant and the periodic reports to be furnished by the commercial finance company to the participating bank. The agreement also provides that the commercial finance company will man age the loan under the terms o f the fi nancing agreement for the joint benefit of the commercial finance company and the participant. There is also a pro vision for termination by either party upon written notice (usually 60 days). Upon termination, the commercial fi nance company usually will have the option to buy back the participation if it so desires. This type of arrangement raises im portant points concerning just where the participating bank stands in this re lationship. » First, what happens in the event the borrower files bankruptcy? The par ticipant’s only claim on the assets of the borrower is through the participa tion agreement. Any right of offset a bank might exercise in this situation would probably be attacked and might stand a good chance of being upset in a bankruptcy proceeding. • Second, where does the partici pant stand if it is construed to be a direct credit of the commercial finance company and not of the borrower? After all, no direct relationship between the bank and the borrower is specified in the loan documents. The partici40 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis pant might find himself in the position of having no direct claim on the bor rower and having the evidence of the obligation held as property of a re ceiver or trustee in bankruptcy for the commercial finance company. This could mean that any payment made to the commercial finance company or any proceeds from liquidated collateral would come directly to the receiver or trustee and be held for the benefit of all creditors of the commercial finance company in the bankruptcy proceed ings. In other words, the bank could find itself to be an unsecured creditor of the commercial finance company rather than a secured creditor of the borrower. The risk of commercial finance com pany bankruptcy in the traditional par ticipation agreement arrangement can be addressed through normal credit de cision-making. This is done by asking: “ W ould we lend unsecured the amount of the participation directly to the com mercial finance company?” Of course, to answer this question requires com plete financial information on the com mercial finance company, including the necessary statistical information con cerning the quality of assets and other aspects of the company’s financial con dition such as would be required to complete the Robert Morris Associates questionnaire for commercial finance companies. If, upon analysis of this information, it is determined that the amount in volved (to include any line of credit or other loans which the bank might have outstanding to the commercial fi nance company) would be a satisfactory credit exposure for the bank, then the participation arrangement may be satis factory. This will require that the com mercial finance company be followed and analyzed just as any other borrow er of this type in addition to following closely the borrower in the participa tion arrangement. In effect, the bank is taking two credit exposures, which may require double the normal time and effort to follow, but it is being paid for only one credit risk. A better approach to the problems cited is an arrangement whereby the bank and the commercial finance com pany extend a mutual rather than a participated loan and take a joint se curity interest in the collateral. In this case, the financing agreements are three-party instruments and reflect the direct obligation of the borrower to both the commercial finance company and the bank. This can be accomplished for the most part by simply modifying the commercial finance company’s stan dard financing agreement to include the bank as a joint creditor of the bor rower and as a secured party under the agreement with an undivided interest in the collateral. Any financing state ments filed to comply with the Uni form Commercial Code should desig nate both the commercial finance com pany and the bank as secured parties. When this sort of arrangement is be ing extended to an already existing loan, the commercial finance company can subordinate, to the extent of the bank’s undivided interest, its interest in the collateral to avoid any problems that might arise with filing a new fi nancing statement. With this joint lending arrangement, the participation agreement itself is re placed by an intercreditor agreement between the bank and commercial fi nance company that spells out the maxi mum amount of the joint loan, the share each will have, the amounts to be advanced as a percentage of value against the various classes of collateral and the interest rate to be charged by the bank on its portion of the loan. Other areas covered are any require ments for reports to be furnished the bank, sharing of costs in connection with collection o f the loan, how funds are to be advanced and payments credited and termination provisions. One of the key provisions of this agreement is the appointment of the commercial finance company as the bank’s agent for collection and admin istrative purposes with a provision that this agreement is revocable at the op tion of the bank. With this provision, should the bank become uneasy about the condition of the commercial finance company, it could begin to service its portion of the loan and have direct ac cess to the borrower and collateral through the joint financing agreement. As a practical matter, this would prob ably result in the bank’s buying the commercial finance company’s portion and either administering the loan itself or bringing in outside expertise. The risk at this point would be if both the commercial finance company and the borrower had deteriorated to the point that the bank did not want to pay off the commercial finance com pany. Assuming that both lenders agreed to liquidate their collateral, there is always a chance that both lenders may not agree on the same pro gram of liquidation. It is possible that this disagreement could result in both lenders collecting less than what each might have realized if the liquidation (Continued on page 54) MID-CONTINENT BANKER fo r D ecem ber, 1976 The Bank Cost Curve And Collateral Administration By STEPHEN C. DIAMOND Senior Vice President, Midwest Commercial Finance Division, Walter E. Heller & Co., Chicago EMBERS of the banking commu nity who have studied the profita bility of various types of loans have learned an essential truth: As a bank increases the administration of collater al— most often taken to minimize loanloss exposure and its cost to the lender — its operating expense as a percentage of funds employed rises almost on a geometric basis. Bankers, like businessmen, know al most instinctively that in order to see satisfactory profits, knowledge of costs is essential. And, it follows, to know total costs they must first know the in dividual costs that make up the whole. So the banker must constantly identify the specific costs of handling indi vidual credits and serving individual clients, just as a manufacturer must keep constant watch over costs of handling individual operations in each step of making a line of products. For many years, banks focused on bad-debt risk, yield and balances as the major variables affecting profitabil ity of a single client to the bank. The assumption has been (given an equal number of checking account transac tions) that operating expenses are gen erally constant for all clients. But now there is increasing recognition that the cost of administering loans does, in fact, vary significantly from credit to credit. For example, assuming equal-sized loans and an equal number of checking account transactions, the amount of op erating expense relating to an unse cured loan to a borrower who has a 1 : 2 debt-worth ratio and a 3 : 1 work ing capital ratio is clearly far less than the operating expense relating to a loan secured by accounts receivables made to a borrower with a 4 : 1 debt- M 100 75 25 0 Figure 1 worth ratio and a 1 : 1 working capital ratio. If we establish a credit continuum (again, assuming equal-sized loans and number of checking account transac tions), with the virtually risk-free loan at the left end and the workout at the right, we see that operating expense as a percentage of funds employed in creases significantly as the credit re quires more work. As we analyze the cost curve, w e see that it is not a straight line curve, but that, in fact, it has an exponential curve similar to that illustrated in Figure 1. As the curve shows, the operating expense required to handle an unse cured loan to a company at the “ high” end of the quality scale is not signifi cantly lower than that required to han dle the same type of loan to a com pany at the “ upper-middle” range of the quality scale. But moving toward the “ low ” end of the quality scale, op erating expense begins to increase markedly. En route we go from unse cured lending to amortizing loans se MID-CONTINENT BANKER fo r Decem ber, 1976 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 50 ASSUMED STANDARD OF CREDIT QUALITY cured by fixed assets, and then on up the security ladder to loans secured by bare code liens on current assets, and through loans secured by mecha nized liens on current assets. Finally, at the extreme right, are workout loans, on which income is not accrued, and on which operating expense becomes an inordinate percentage of funds em ployed. Once it is recognized that operating expense attributable to a given credit increases as daily administration of col lateral increases— that is, secured loans require continuous analysis of their se curity— each lender can decide what quality of credit on the credit contin uum will qualify for borrowing, what operating expense level is needed to administer that credit on a basis to mini mize eventual bad-debt exposure, and what yield is needed to earn a satis factory profit on that credit. W hen those variables are determined, many options begin to open up. For example, a bank may elect to staff itself to han dle credits only down to the “25” qual ity level, because it has determined that, on the basis of its marketing and credit policies, incremental costs on loans below that level exceed incre mental profit potential. However, other banks might reach a judgment to swing further to the right end of the contin uum. At any rate, each bank should estab lish— formally or informally— a level be low which a credit is not bankable, solely because the bank cannot expect to earn a satisfactory profit on the loan. Yet, most banks still can have a substantial and profitable market to the right of their chosen “non-bankable point” on the quality scale. A significant issue, then, is how the bank can attack 41 that sector without incurring signifi cant bad-debt exposure or without in creasing operating expense to the point where profit disappears or pricing be comes unrealistically high. The answer for the large majority of banks is to let a professional secured lender become the “ back office” for the bank, through one of several time-test ed cooperative arrangements. In this way, the bank can move into handling credits which are “ good,” but good only with significant collateral admin istration. For one thing, these secured lenders (the commercial finance firms) are spe cially staffed to administer the types of credits that are involved. Secondly, they can spread the operating expenses peculiar to secured financing over a wider client base, since they serve a geographically wider market than most individual banks. Thirdly, there is ex perience. Because the professional se cured lenders deal primarily in this grade of credit, they have developed in-depth staffs, which most individual banks could not justify on an on-going basis for their relatively few credits re quiring total collateral administration. All in all, what we are saying is that, because of the nature of their business, secured lenders can deliver to many banks the “ ultimate product,” i.e., a loan which is better administrated at a lower cost than the bank could deliver on its own. Normally a bank cooperates with a secured lender on a participation basis. The professional secured lender struc tures and administers the loan, while Ribbon of Money Snipped the bank participates in the financing package by buying back a piece of the loan. The bank has the benefit of an account relationship, plus a satisfactory yield. Yet, with it all, the bank has a minimal operating expense in conjunc tion with its investment— and it is clear ly identified with a specific loan. The borrower gets a relatively low blended rate, reflecting the relative percentage of the bank’s and the secured lender’s investments. The concept has proven applicable to some money-center banks, most re gional banks and virtually all local banks with the primary variable being the level o f credit the bank is staffed to handle professionally on its own. And, of course, in these highly coop erative arrangements, the banks must rely upon the professional competence of a secured lender. How, then, does a bank judge this capability? Here we have a strong rec ommendation: “inspect the premises.” Visit the operating office; talk to the operating supervisors. Inquire about the secured lender’s performance record. In short, make a personal judgment of the people who will actually service your account, and insist upon knowing how well they’ve done for other banks, in a variety of circumstances. The decision of a bank on whether to administer an account itself or to participate with a professional secured lender is no different than judgments manufacturers must make on whether to purchase a component from an out side supplier or produce it themselves. (Even the largest manufacturer ac knowledges there are some cases where make-or-buy analysis shows that pur chase is more economical than produc tion.) A close analysis of your individual bank’s cost curve will indicate the level at which it makes more sense, and is more profitable, to have a professional secured lender administer the credit than to attempt to do it yourself. * * New Organizational Structure, Sister Ann Judith, C .S.J., adm inistrator, St. Joseph's Home for Boys, St. Louis, cuts a rib bon of 30 $10 bills at the form al opening of the G ra vo is Banking Center of St. Louis' Mer cantile Trust. Pictured, I. to r., a re : Richard A. G ep hard t, alderm an for St. Louis' 14th W ard and new U. S. congressm an-elect from -the Third District of M issouri; Harrison F. Coerver, pres, of the bank; Donald E. Lasater, eh.; Sister Ann Judith; Lieutenant Robert Tuckey, Third District Police Div.; and John H. Schw eitzer, a .v.p . and mgr. of the new center. St. Joseph's Home for Boys received the ribbon-cutting donation. The new center, w hich opened Novem ber 1, contains 4,000 square feet of w orking space, has six driveup w ind ow s, six lobby tellers and a 24-hour Fingertip Banking M achine. 42 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Senior-Management Change Announced by New York Bank N E W YORK CITY— Manufacturers Hanover Trust has made a series of senior-management changes, some re lated to a new organizational structure for its metropolitan division. John R. Torell III was promoted to executive vice president and named to the general administrative board (G A B ), the bank’s senior internal pol icy-making group. He succeeds Philip H. Milner as officer-in-charge of the M anufacturers H anover Trust of N ew York City's new m etropolitan team is pictured here (I. to r.): John R. Torell III, e.v.p. & officer in charge, m etropolitan div.; Douglas E. Ebert, s.v.p. & deputy gen'l m gr., branch banking group; and Edw ard A. Farley, s.v.p. & deputy gen'l m gr., corporate banking group. metropolitan division. Mr. Milner, who continues as executive vice president and a member of the GAB, was made assistant to the president. Within the banking department, he is undertaking administrative and credit duties as as signed by the president. Douglas E. Ebert was promoted to senior vice president and deputy gen eral manager in charge of the new branch banking group. Edward A. Far ley was advanced to senior vice presi dent and deputy general manager in charge of the new corporate banking group. This group includes correspon dent banks in the New York metropoli tan area and in New York state. For mation of the new banking groups in the metropolitan division was part of the new organizational structure. Mr. Ebert had been a vice president in the national division, and Mr. Farley had been a senior vice president in the metropolitan division. The bank also elected two other sen ior vice presidents as part of the new organization: Herbert J. Brauer, branch banking group; and Frank C. Wright Jr., corporate banking group. Both had been metropolitan division vice presi dents. In other senior-management promo tions unrelated to the new organization al structure, the following officers were made senior vice presidents: Bruce F. Henderson, who continues as regional manager, M iddle East and North Af rica; John L. McCarthy, who continues as regional manager for international business in the U. S.; Donald G. McCouch, who continues as regional man ager for eight Far Eastern countries; and John J. Simone, national division. Mr. Torell had been senior vice presi dent and deputy general manager with responsibility for the metropolitan di vision’s retail and institutional banking activities. MID-CONTINENT BANKER fo r D ecem ber, 1976 A Look at Participations— The Profitable Partnership ANKS HAVE increasingly come to rely upon the concept of partici pation with commercial finance com panies as a means of expanding thenservices to bank customers. A partici pation involves the cooperative effort of both bank and commei-cial finance com pany to meet the total financing require ments of a bank customer. In a typical participation, the bank and commercial finance company pro vide 100 % of the loan administration. The bank receives half of the income with no administrative expense. For example, if the loan is $ 1 ,000 ,000 , the bank and commercial finance company will each employ $500,000. The inter est rate charged to the borrower will reflect the 5 0 /5 0 relationship— half at the bank rate and half at the commer cial finance company rate. The type of situation best lending itself to participation is that which in volves a business whose debt require ments cannot be satisfied through con ventional banking practices. Frequent ly, a customer’s needs exceed the amount a bank may care to extend un der conventional banking criteria. Nor mally, those needs can be met through commercial financing, since the basic market for commercial financing lies in the strength of the commercial fi nance company to meet the needs of the small-to-large business that is un able to support its growth through either its own working capital or bank credit. Those needs can usually be met b e cause of a unique lending philosophy. This philosophy is based upon collater al orientation— knowing the true col lateral value of those assets which are offered as security for the loan. The principal types of collateral most often looked to are receivables, inventory and equipment; and it is the approach of the commercial finance company that these assets represent resources a com pany can use to obtain added borrow ing power. W hen a commercial finance company works with a bank via the participation route, it can be truly said that the parties— the bank and the borrower— benefit. The borrower benefits through being able to satisfy his total financing B By SHELDON G. KARRAS Senior Vice President Associates Commercial Corp. Chicago requirements. The bank benefits b e cause it has provided a solution to a customer’s financial problems while at the same time increasing its capacity to serve a broader range of customers, thereby increasing its own growth op portunities. In addition to participation, other ways exist in which a bank might work with a commercial finance company. A bank may refer a customer to a commercial finance company and elect not to participate. In such a case, the credit demands can frequently be met by the secured lender while the bank retains the depository relationship. Another example involves the seg menting of a loan. Often, a bank might feel more comfortable advancing funds against the fixed assets of a company in the traditional fashion of a term loan, while the commercial finance company advances funds secured by receivables and inventory on a revolv Bank, Firm Helped by Commercial Financing N EXAM PLE of how well a bank can work with a commercial finance firm l involves a metal fabricating company that is a customer of f ort Worth National. According to J. C. Brown, executive vice president, this fairly young firm experienced such rapid growth in sales that it soon became too highly leveraged. Fort W orth National continued to loan against the firm s receivables and in ventory until requests for credit exceeded $1 million. The volume of receivables at this point had become heavy and was turning rapidly. Because the firm’s operating performance had been good and because manage ment had demonstrated excellent capabilities, the bank felt the firm s future was bright and wanted to retain its business. The bank contacted a commercial factoring firm that managed a much larger line of credit than the bank. The factoring firm sold a participation back to the bank. According to Mr. Brown, this proved to be a perfect solution. Money was tight at the time, so the bank’s participation was reduced from what the loan had been. Since the bank kept all the depository balances, overall profitability increased markedly, according to Mr. Brown. The factoring firm monitored the receivables and the customer reached new heights in sales as a result of the larger credit line. After two years, the customer had progressed to the point that no financing was needed. The firm’s current accounts at Fort W orth National are six figures in checking and six figures in savings. A MID-CONTINENT BANKER fo r D ecem ber, 1976 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis ing basis. The result, two distinct loans, each secured by different classes of collateral. Perhaps the above can be best illus trated by two recent situations in which Associates Commercial Corp. was re ferred by midwestern banks. An Iowa chemical company experi enced dramatic growth, with sales in creasing from $18,000,000 in 1973 to $67,000,000 in 1975. W hile net worth increased from $250,000 to $5.5 mil lion dollars, local banks were unable to extend the necessary financing com mitment. The nature of the industry required the company to build inven tory during a six-month period, during which time sales were at a minimum. In 1976, the company required a $ 20 ,000,000 extension of credit, a sub stantial increase over the preceding year, in order to support its inventory growth. Associates was looked to for assistance by the local bank and the following program was structured: A $20 ,000,000 line of credit was arranged, secured by accounts receivable and in ventory. As receivables were collected, the company was actually able to repay the total loan. The bank elected to par- 43 ticipate, along with its major Chicago correspondent, in providing 50% of the total line. An additional situation further illus trating the capacity of the commercial finance industry involved a firm at the opposite end of the spectrum. This company, heavily involved in the fabric industry, suffered extreme losses in 1974 as a result of management de cisions based upon anticipated market conditions. The losses resulted in a need for funds in excess of that which could be made available under the com pany’s previous line of credit. In addi tion, federal bank examiners, as a re sult of the losses, had classified the loan. Associates was looked to as an al ternative source of financing, and was able to structure an accommodation se cured by accounts receivable, inven tory and fixed assets, the proceeds of which were used to repay the bank loan and provide additional working capital for the company. The bank elected to participate with Associates to the extent of 50%, and at the time of return to profitability, intends to again be the company’s sole lender. It is, and has been, the policy of Associates Commercial Corp. to return its clients to the bank of original re ferral at such time as that bank feels comfortable in meeting the company’s credit demands. Commercial financing is neither a source of easy money nor are commer cial finance companies high-risk lend ers. W e simply have developed oper ating techniques with respect to col lateral which permit us a high degree Financing Deal Announced Associates Commercial Corp., Chi cago, has announced a program of inventory and retail financing for dealers of the Freightliner Corp., manufacturer of heavy-duty trucks in Portland, Ore. The firm is establishing a nation wide network of franchised dealers to sell and service trucks to fleet op erators and independent owner/op erators. In cooperation with Asso ciates Commercial Corp., Freightliner dealers will be able to offer on-the-spot financing to their cus tomers, as well as finance their show room vehicles. Associates Commercial Corp. is the commercial financing subsidiary of Associates Corp. of North Amer ica, a Gulf & Western company, and has diversified interests in commer cial lending, factoring, industrial fi nancing and leasing, as well as heavy-duty truck and trailer financ ing. 44 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis of flexibility. The availability of this expertise tends to explain why more and more banks are looking to com mercial finance as a viable alternative to meeting the needs o f their customers, and as a means of expanding their own banking services without additional cost. # • Workable Banking System Should Not Be Disrupted By More Controls—CSBS • Beyond the question of equity, a system including optional member ship is a great stimulant to the inter bank correspondent system which so well serves the needs of bank customers throughout the world. A CSBS spokesman says the study “ refutes the claim that member banks as a whole are treated inequitably by virtue of their reserve requirements, and demonstrates that it is far more likely that some banks enjoy a net ben efit from Fed membership and some from nonmembership. “It further asserts,” he notes, “ that the banking system is strengthened by the existence of a member/nonmember alternative primarily because such a choice has fostered the evolution of the dynamic and responsive private cor respondent banking system. It follows logically that a workable banking sys tem with emphasis on private initiative and efficiency should not be disrupted by more defined government control, absent demonstrated benefits there from ,” he says. W ASH IN G TO N , D. C.— The Con ference of State Bank Supervisors (CSBS) has released a comprehensive analysis of the relationship between optional membership in or affiliation with the Federal Reserve System and equitable treatment between member and nonmember banks. A major conclusion of that study is that a workable banking system with emphasis on private initiative and ef ficiency shouldn’t be disrupted by more defined government control. Fore! The study, which is entitled “ O p tional Affiliation With the Federal Re Bank-Sponsored Promotion serve System for Reserve Purposes Is Consistent W ith Equitable Treatment Gets People 'Teed O ff Between Banks,” was prepared by A customer-appreciation promotion Lawrence E. Kreider, CSBS’ executive of National Bank of Odessa, Tex., re vice president-economist. Assisting him sulted in getting many people in that was Raymond T. Garea, director of re area “ teed off.” search and education. No, the residents weren’t angry at The study was made as a result of a the bank; the institution was giving fundamental disagreement concerning away free passes to play Putt Putt min the validity of the Fed’s contention that iature golf. National Bank sponsors six the present system is inequitable be Junior Putters of America golf teams cause nonmember banks can meet state during the summer months and de reserve requirements with earning as sets while member banks must hold cided, in conjunction with Putt Putt, to “idle” reserves with it. CSBS con sponsor the promotion. sistently has challenged the Fed to d oc The event was advertised with large ument that claim and has asserted that outside signs and coordinated indoor nonmembers also have non-interestsigns at the bank. Statement stuffers bearing, reserve-type assets; that mem went out prior to the promotion and ber banks tend to benefit from more their message was “ At NBO customer non-interest-b e a r in g , correspondentappreciation is PAR for the course.” type liabilities, and that the present Tickets for a round of miniature golf system is consistent with equitable were available at tellers windows. treatment. More than 5,000 tickets were given The four major conclusions drawn by away and 1,520 people played Putt the study are: Putt. One of the two prize categories • Optional affiliation with the Fed offered by National Bank was a $25 for reserve purposes is consistent with savings account for the daily low score, equitable treatment between member while 200 free checks were distributed and nonmember banks as two groups. to each person scoring a hole-in-one on • To the extent, if any, that inequity one of the course’s more difficult holes. exists, it is as great between one mem Results of the promotion were pleas ber bank and another as it is between ing, according to a bank spokesman. a member and a nonmember bank. Two people who won savings accounts • To the extent inequities may exist, kept their money in the bank and Na they could be corrected largely by tional Bank enjoyed much favorable moderate changes in Fed reserve re comment about the promotion from quirements within the framework of people in the community. “ People were existing statutes and regulations and impressed,” the spokesman said, “ when without disrupting appropriate mone they saw how much it would have cost tary policies. to play without the free passes.” MID-CONTINENT BANKER for December. 1976 He II be wheeling in to see you soon. As the newest member ot our correspondent banker team , Gary R. Dobson is a man on the move. . His job, as Vice President of Correspondent Banking, is to help with your problems, and it’s easier for him to do that if he knows them. He already knows who to contact for specialized help. Wait for him to wheel on in, or for *. im m ediate help a n d e d v ic e . . . iust call Gary. He mav not be d him. Tulsa. iry. A B etter ter's Banker. 18) 587-9171 Excalibur courtesy o ‘ aine Irret M A Tulsa MID-CONTINENT BANKER fo r D ecem ber, 1976 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 45 mium-saving risk management tech niques and a guide to important insur ance coverages and markets, including the bankers blanket bond, directors and officers liability, ERISA and other fidu' ciary liabilities, trust department errors «4nd omissions, safe deposit liability and new exposures arising from EFTS par ticipation. The entire seminar is struc tured toward providing each participant with a greatly increased ability to pro tect his bank’s assets from accidental and criminal loss and minimize its pre mium costs. In addition to the subjects mentioned above, registrants will hear a panel on “ Organizing and Administering Your Bank’s Insurance and Risk Management Program,” a talk on “ Risk Control” and Jock W . W hittle (3rd from I.), ch., FA CE Committee, and ch.. W hittle Group, C hicago, an sw e rs re presentations of a group case prepara porter's questions at n ew s conference held in N ew York City to announce advertising code of tion and a group case problem. Speak ethics and guidelines for financial institutions. Pictured, I. to r., a re : E. Fa irfax Randolph Jr., v.p.-m arketing, First N at'l, Dayton, O .; Vicki A. Thom as, dir., nation al ad program , Credit Union ers will be Richard F. Spencer, presi Nat'l A ssociation, M adison, W is.; Mr. W hittle; Eugene J. C allan , im m ediate past pres., Bank dent, First National, Liberal, Kan. (he M arketing Assn., and pres., N ew York Bank for Savings, N ew York C ity; A lan B. Eirinberg, s.v.p., has a background in insurance); Ray & m arketing dir., Exchange N at'l, C hicag o; and Thom as W . Taylor, asso ciate deputy comptroller mond V. Brady, vice president, Frank of the currency, W ashington, D. C. All are members of FACE Committee. B. Hall & Co., of N ew York, Inc., and manager of its financial institution de F I N A N C I A L INSTITUTIONS now reasonably be expected to understand partment; Dale C. Hatfield, vice presi have a code of ethics that includes in making an intelligent purchase de dent, Bank of California, San Francisco; specific guidelines governing their ad cision. It is not necessary for a financial and H. Felix Kloman, president, Risk vertising. The code was developed as a advertisement to contain all the facts Planning Group, Inc., Darien, Conn., result of research and recommendations about a service because of media physi and San Francisco. by the Financial Advertising Commit cal limitations. However, any features, tee on Ethics (F A C E ), an industry any terms (including price) or any pur Bad Check Passers Nipped group formed in January, 1975, to By NAPS in San Antonio chase benefits must be presented in a study the need for financial advertising manner that does not mislead either by SAN A N TO N IO — New Account Pro guidelines. Since its formation, FACE what is stated or by what is omitted.” cedure Systems (N A P S ), a joint ven has received valuable input from rep Mr. Callan also made it clear that the ture by participating members of the resentatives of commercial banks, credit code is purely self regulatory in nature San Antonio Clearing House Associa unions, S&Ls, mutual savings banks and and added that although the FACE tion, is making major headway in the federal regulatory agencies. Committee explored all possible systems battle against bad checks, according to Areas covered by the code and guide of control, audit, penalties and cor Frost National, a participating bank. lines are those thought to be the most rective measures, it was concluded After its initial eight months of op susceptible to advertising misinterpreta unanimously that industry groups had eration, NAPS has pinpointed more tion: “ free” services, “free” checking ac no legal or alternative means of en than 500 likely bad-check passers who counts, price reduction or savings forcement. were attempting to open new checking claims, packaged services, premiums Copies of the full code are available accounts at participating banks. and giveaways, deposit insurance, in from the BMA, 309 W est Washington Through NAPS, participating banks Street, Chicago, IL 60606. • * definite superlatives in connection with that closed an account because of bad rate comparisons and communication to checks, or that receive checks after an customers of how interest rates are Risk Management Seminar account is closed, report the relevant computed. information to the NAPS central office. Scheduled for Feb. 6 -9 Chairman of FACE is Jack W . W hit The information is then coded in a tle, chairman, the Whittle Group, Chica By American Bankers Assn. master file and is available by phone to go, and former vice president-market any participating bank. The file in ing, Continental Illinois National, Chica “ Concept and Purpose of Insurance cludes bank transaction reports only, go. The code and guidelines were ap and Risk Management in Banking” and and access is limited to participating proved unanimously by the boards of “ Identifying and Evaluating Your Bank’s banks. the 4,500-member Bank Marketing As Exposures to Accidental Loss” are two W hen a customer opens a new ac sociation (B M A ), headquartered in of the topics to be discussed at the count, personnel at the bank call NAPS’ Chicago, and the 23,000-member Cred ABA’s Risk and Insurance Management unlisted number, identify the bank by it Union National Association (C U N A ), in Banking Seminar February 6-9. The Madison, Wis. code and give the information on the seminar will be held at the Doubletree prospective customer. NAPS will reply According to Eugene J. Callan, im Inn in Tucson and will be limited to on file or not on file.’ No time is mediate past BMA president and presi 60 banker/executives responsible for lost in opening an account because the dent, New York Bank for Savings, New their banks’ insurance programs and entire report can be supplied in less York City, the cornerstone of the code management of their accidental and than 30 seconds. is contained in its definition: “ A fi criminal loss exposures. All 40 banks in San Antonio, plus nancial advertisement is ethical when it The seminar, one of a series, will is truthful and when it contains infor provide these executives with practical, those in Cibolo, Kerby and Schertz, mation that the intended audience can Tex., are participating in NAPS. effective working knowledge of pre Advertising Code of Ethics Developed For Banks and Thrift Institutions 46 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis M ID-CONTINENT BANKER fo r D ecem ber, 1976 a •fit t M X a ir i T he Road to M ain Street* A bckat correspondent banking by America’s premier correspondent bank. MANUFACTURERS HANOVER https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis ‘A l M anufacturers Hanover, the lational Division is a traveling unit, stress not only the right road, but :he right people to travel that road? T he right road* When correspondent banking began, over a century ago, it grew with the railroads. New towns grew up along the “roads,” and new banks set up shop in the towns. We built our family of correspondents by following the railroads—bringing “interior” banks the money center services they needed to serve their customers. Today, with more than 3,200 banks around the country calling us their banker, MHT is America’s premier correspondent bank. And for good reasons. As our correspondents have grown, Manufacturers Hanover has anticipated their needs. We offer not only the basic breadand-butter services, but innovative and specialized services as well. And we put our specialists at your disposal, to help you serve your customers completely and profitably. M aking funds m ove—faster. MHT gives you an edge in your day-in, day-out needs. For cash letters, domestic and foreign collections, wire and other funds transfers—the competitive edge we give you is speed. Automation where it counts most, insuring accuracy and better transaction control. We even serve correspondents by T he nitty-gritty o f securities handling* helicopter. O ur Early Bird is a helicopter relay Manufacturers Hanover has always been important to service that enables you to meet the 10 a.m. | its correspondents for safekeeping and handling of securities. Clearing House deadline—speeding items Vault safety was one of our earliest concerns. Back in from airport to our processing center, to turn the 1800s, some of our people came up with the unique checks into earning assets almost instantly. idea of putting cannonballs in the walls around the vaults. Thus, if a thief tried to tunnel through to the money, he’d get | zonked on the head with a cannonball! Serving your A u n t Jane. Times have changed. Today we house all securities in Through our specialized corporate trust services, Iunderground vaults safeguarded by a highly sophisticated you can provide your corporate customers with modem protection system and backed by a complete recordstockholder relations programs. | keeping system. Transifac, our fully automated Looking toward a future book entry, certificate-less system of securities transfer operations, * system, we offer correspondents an inexpensive piggy-back provides complete on-line shareholder « participation at the Depository Trust Company, probably the and bondholder information. 4 most advanced and comprehensive securities depository MHT issues of commercial paper | system in the world. and certificates of deposit assure timely If you want to act as a paying agent for bearer secudelivery to broker or purchaser. And we Irities, consider our famous “Coupay” service, the first can act as paying agency, co-paying completely automated system for coupon paying, recon agency or trustee for corporate and ciliation and destruction. municipal debt issues, and offer complete escrow services. H ow now , D ow Jones? Correspondents can tap MHT’s trust specialists to serve their customers’ investment needs. For instance, more than 20 analysts in our research department, plus our roster of economists, back up PIR/C—Professional Investment Research, Computer-Aided. In this program, we furnish subscribers with the same information supplied to our own portfolio managers. And we back it up with additional counsel whenever needed. Manufacturers Hanover expertise is also available for assistance with a correspondent’s own investments. We tailor your program to your bank’s position. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis ! T h e street that goes ’round the w orld. MHT is a leader in worldwide banking. We offer you the flexibility of this country’s largest network of international correspondents. You can also serve your customers with MHT counsel based on first-hand knowledge of economic and political conditions; and with foreign credit information, exchanges, collections and remittances. MHT international letters of intro duction and commercial letters of credit are recognized and used universally. Manufacturers Hanover pioneered the International Money Order in this country. It has worldwide negotiability and unique safety features, and the IMO is personalized with your bank logo for maximum identification. T h e credit alternatives o f the ’ 70s. Your ability to meet customers’ credit needs is crucial in maintain ing your position in your market. MHT’s capabilities help you to be competitive by making available a full range of credit programs. Through our affiliate, Manufacturers Hanover Leasing Corporation, you can meet the growing demand for this equipment financing method, anywhere in the world. O ur factoring and commercial financing affiliate, Manufacturers Hanover Commercial Corporation, helps you serve your customers’ accounts receivable financing needs. MHCC may participate in such lending but you retain the direct loan relationship with your customers. And you have MHT’s expertise, including our advanced computer programming, to evaluate loans in a variety of industries. Benefits for your em ployees. Whether you have 15 employees or 1500, you can offer them a most attractive fringe benefit—at a modest cost to you—by joining our group life insurance program. It’s a plan with up to $250,000 in individual coverage that can be tailored to your bank needs. Economies of scale also permit you to participate at low cost in our major medical and long-term income protection plans, as well as pension programs. As the leading supplier of corre spondent benefit plans, MHT can make it possible for your bank to attract high quality personnel by providing big-company benefits. T he right people. We’ve come a long way since the days when one of our traveling bankers crossed the Andes on a burro to call on a South American correspondent. But it’s still a prime rule among our people to know the “territory.” The MHT traveling banker gets to know your needs. Behind each officer are service specialists who go into the field whenever needed. We group our people in multi-tiered teams to give you the kind of professional service to help you meet competition. So if you want to get on the right road to correspondent banking services, give us a call. The number is (212) 350-6604You’ll find us easy to talk to. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis T he road to the future. The banking marketplace is changing before our eyes, transformed by computer technology. Interbank funds transfer technology is in a revolution as well. As we look down the road, we see vital new services developing, while many traditional services disappear and transaction costs go down. Manufacturers Hanover is in the forefront of EFTS changes, nationally and internationally, helping correspondents to manage the transi tion to the future. Through the New York Automated Clearing House, MHT will have access to the National Network of Automated Clearing Houses, international depository account ing system has increased MHT’s efficiency in processing large dollar international payments. I - f f - - ; .... tr~— H A N K ic = ^ — MANUFACTURERS HANOVER Correspondent Services. General Banking Corporate Trust Bank Money Orders Cash Letters Demand Deposit Facilities Domestic Collections Early Bird Gift Checks Money Transfer and Wire MOREC—Money Order Reconcilement Register Checks Transend Certificate o f Deposit Issuance Co-Paying Agent Co-Registrar Reconciliation and Destruction o f Debt Issues Transfer Agent/Co-Transfer Agent (Transifac) Meeting Room and Auditorium Special Services Economic and Business Publications Marketing Consultant Travel Service/Personal Service Credit Services Investigations Overlines Manufacturers Hanover Commercial Corporation (commercial finance, factoring) Manufacturers Hanover Leasing Corporation Employee Benefits Group Life Insurance Plan Long Term Income Protection Plan Major Medical Plan Retirement Program International Acceptance Financing Commercial Letters o f Credit Export Financing Foreign Credit Information Foreign Collections Foreign Exchange IM O —International Money Order M IDAS—MH International Payments System Overseas Branches, Representative Offices, Affiliates Remittance o f Funds Abroad Tip Packs Personal Trust Personal Financial Planning Course P IR/C —Professional Investment Research/Computer-Aided Trust Development Course Portfolio and Investment Banking Federal Funds MHC Commercial Paper—Other Commercial Paper MHT C /D s US Governments, Federal Agencies, Municipal Bonds, Bankers Acceptances Investment Counseling Securities Coupon Collection Equity Safekeeping (Depository Trust Company) Federal Book Entry Safekeeping Security Drafts If you’d like to learn more about our Correspondent Services, call (212) 350-6604. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Member FDIC Sidestepping Ethics in Banking Can Produce a 6Watergate9Bank I N THE SUMMER of 1969, John Jones, chairman and chief executive officer of the “Watergate Bank (WB), Silver Spring, M d.,” learned that stock representing control of the bank was for sale for $6,900,000. He viewed the bank as having substantial potential for growth and profitability and viewed it as having languished under the hands of present ownership for some time, during which it fell behind competition in deposit growth and income. This view was shared by a vocal minority of the bank’s board. They joined a few minority stockholders in recommending that Mr. Jones purchase this block of stock, indicating support of him and his administration for change if he did. To finance the purchase, Mr. Jones consulted W . Will Help, senior vice president of his Baltimore correspon dent, Upstream National Bank (U p stream). During their conference, these facts emerged: At mid-year, W B had deposits of $135,000,000, total resources of $155,000 , 000 , a loan portfolio of $81,000,000, a securities portfolio of $40,000,000 , of which $16,000,000 was in taxfree bonds, and capital, surplus, undi vided profits and reserves o f $ 10 ,000 ,000. In the prior year, it had earned $950,000 after taxes for a return on capital funds of 9 /2%, about average for its competitive area. Mr. Bow en's article is based on a speech on banking ethics he ga ve last June at the Ston ier G ra d u ate School of Banking, Rutgers U niversity, N ew Bruns w ick, N. J. The article describes an im agin ary bank w hose officers en gage in insider d e a l ings and payoffs. Mr. Bowen exam ines in stances of excessive entertainm ent a n d /o r bribes in the pursuit of business at this bank. By WILLIAM H. BOWEN President & CEO Commercial National Bank Little Rock Mr. Jones then was drawing a salary of $60,000 plus standard perquisites of office, including retirement benefits, a bank car, club dues and expenses as related to bank entertainment. His out side income totaled $40,000. Tentative agreement was reached with Mr. Help to make the $6,900,000 loan to Mr. Jones secured only by the purchased stock and endorsed by him and his wife. Upstream had a loan limit of $4,000,000. Mr. Help’s plan was to keep $4,000,000 of the loan and sell a par ticipation of $2,900,000 to its New York correspondent, Frankly National Bank (Frankly), at a rate of 3%, a oneyear term with renewal expected with undergirding as next related. At the time, the prime rate was 8 /2%. To compensate Upstream for extend ing the credit at a preferential rate, funding it and arranging participation o f the excess line with Frankly, it was proposed that Mr. Jones cause his bank to place $4,000,000 on deposit with Upstream in a non-interest-bearing ac count, which money was to be left un disturbed until Mr. Jones reduced or paid the loan in full. If the loan was reduced, the nonearning balance would be reduced proportionately. It also was agreed that during the existence of the loan, Upstream was to receive a constant return on the loan made to Mr. Jones of 7 /4% per annum produced in combination by the 3% rate plus income earned on the noninterest-bearing deposit. Interest alone the first year was go ing to cost Mr. Jones $207,000, which was $107,000 more than his total in come at that time. Messrs. Help and MID-CONTINENT BANKER for December, 1976 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Jones projected income potential as follows: Credit life premium income in the bank was averaging about $35,000 a year. Mr. Help noted that in some banks the CEO retained this income. Mr. Jones’ 51% stock interest in the bank— representing 153,000 shares of 300,000 shares outstanding—would provide $153,000 in dividend income annually at the current annual dividend rate of $1 per share. Projecting income of $288,000 and assuming most or all of the interest payable on the bank stock loan would be deductible for in come tax purposes, it appeared that xMr. Jones could meet his interest obli gation. No discussion ensued between Mr. Jones and Mr. Help as to compensating balances from W B which support the $2,900,000 participation o f Frankly. It is assumed that W B had existing bal ances there which supported this credit and justified its participation in a 3% overline loan. Returning to the bank after his con ference with Mr. Help, Mr. Jones sought the counsel of two experienced and supportive board members from among his 18-member board, together with his executive vice president. They discussed ways and means to increase Mr. Jones’ income and dramatically build deposits and net after-tax income of the bank. A salary increase to $85,000 was gen erally endorsed, and it was agreed that the $35,000 of credit life premiums would be channeled to him. The board would be told only that the credit life business would be taken over by Mr. Jones with no details being supplied them. It was expected that no questions would be asked. At this level, Mr. Jones’ salary was approximately $45,000 more than the maximum income paid CEOs of any other bank of W B’s size in the com- 51 petitive area. Also discussed was a plan to reach public funds at all levels of govern ment. A time-honored proposal emerged for heavy entertainment of public o f ficials entrusted with management of these funds. Immediately, the state treasurer and his wife were to be taken to Las Vegas and Santa Anita for one week each. A budget of $5,500 for this trip seemed appropriate for intermittent balances of up to $1,500,000 believed to be under the treasurer’s control. A d ditionally, it was agreed that the state treasurer’s expenses at the fall meeting of the state bankers association, esti mated at $ 1,000 , would be borne by the bank. A comparable entertainment budget was planned for lesser state officials who controlled several million dollars of public funds. Looking to 1970, an election year, and emphasizing the importance of p o litical support, Mr. Jones proposed to his executive vice president that the bank undertake a select bonus plan for the five senior officers, with each being expected to retain out of the bonus an amount equal to the income tax due and to turn the balance over to Mr. Jones. Hoping to be appointed to the state banking board or another com parably prestigious board, Mr. Jones was ambitious to make contributions that would receive high-level attention. T o produce $20,000 net after tax for his political fund, it was agreed that $35,000 total bonuses would be paid at $7,000 per senior executive. Mr. Jones was to handle this political largess by himself. Lastly, Mr. Jones and his executive vice president set their net income sights at $ 1,200,000 net after tax for 1970. This was a $250,000 increase over 1968 as well as income projected for 1969. It would provide a return of just under 12 % on capital funds, substan tially above the average return on banks their size in the area. T o meet this ambitious goal, they undertook stringent cost cutting, personnel cutting and planning across the face of the bank. Mr. Jones convened his three other senior officers with his executive vice president and “ laid the law down to them” about profitability. What are the ethical considerations of all elements of Mr. Jones’ plan? 1. Compensating balances to support Mr. Jones’ credit. The $4,000,000 in idle funds left with Upstream Bank are earning assets of WB. Failure to invest them at prime rate as part of the bank’s portfolio, for example, causes the bank to lose $350,000 a year. Moreover, since Mr. Jones is borrowing at 3%, a rate 5 /2% under current prime, he is encountering per 52 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis sonal savings on interest of $379,500 a year. Clearly, Mr. Jones has a fiduciary duty to use the bank’s assets for its benefit, not his. Additionally, if he ap propriates bank funds or the income from bank funds to his own use and purposes, he is breaching Circular No. 31 issued October 22, 1970, by the Comptroller and 18 United States Code No. 656 making it a crime willfully and knowingly to misapply monies or funds of a national or reserve member bank. 2. Usurping corporate opportunities. A bank official has a general ethical and fiduciary duty to commit his full time and energies to the bank. The credit life function of a bank serves it at least in two ways: ( 1 ) credit life undergirds the loan to which it applies, and ( 2 ) premium income produced by lending personnel supports the bank’s earnings and properly accrues to the bank. Arrogation of these funds with out full knowledge and endorsement of the bank board acting with full knowl edge and notice of the import of its judgment is a usurpation of a corporate opportunity which is actionable at law. 3. W astage of corporate assets. By using bank funds to acquire the controlling stock, Mr. Jones is wasting corporate assets in breach of ethical and fiduciary duty. His salary and side income are unconscionable and un sustainable. Let me illustrate: 1. Increased salary $ 85,000 2. Credit life premiums 35,000 3. Bank stock loan in terest saving per year 379,500 $499,500 The facts of the case assume that a salary over $75,000 is excessive. Here corporate income an d /or corporate as sets were wasted in production of an excessive salary payment of $424,500. Normally, courts will not substitute their judgment for that of a bank or a corporation on the question of excess salaries except where there is a clear showing of fraud, illegality, an ultra vires act (an act in excess of legal au thority) or gross negligence. It would appear that income this excessive would be repudiated by a court at the instance of a stockholder. 4. Payments to obtain business. Entertainment in support of and in pursuit of business is time honored and appropriate so long as it is reasonable. Entertainment is questionable when it’s so excessive as to becom e a bribe. Ethical behavior invites restraint in use of entertainment to a point where reasonable men would not even question the propriety of it. W hen en tertainment reaches the proportion of a bribe, both parties are subject to prosecution. 5. Political contributions. Political contributions of personal funds are legal, ethical and to be en couraged as supportive of our demo cratic system. Use of bank funds, di rectly or indirectly, for this purpose breaches federal statutes where federal elections are involved. Moreover, if the political gift generated from bank funds redounds only to the benefit of the of ficer who makes the contribution, then unethical wastage of corporate assets is involved. 6. Bank goals for income production and expense control beyond reach. Bank goals that incorporate “ stretch” are widely endorsed and are proper. Goals beyond reach, if coupled with an aura or attitude that anything goes to reach these goals, are unethical. * * Alabama Banker Named Recipient Of NABW Scholarship Award Jane Poovy, senior vice president, Farmers & Merchants Bank, Centre, Ala., is the 1976 winner of the Nation al Association of Bank W om en’s Schol arship Award. The latter is granted annually to an N ABW member whose integrity of character, qualities of lead ership and educational prowess are representative of women bank officers and who has qualified as a regional Scholarship Award winner for the cor responding year. Mrs. Poovy, winner for the Southern Region, will re ceive funds to cov er tuition, room and board at a graduate school of banking until com pletion of the course. Four other MidC o n t i n e n t - area bankers were among the region al scholarship win ners this year: Dorothy L. Harris, trust administration officer, Busey First National, Urbana, 111.— Lake Region; Lorene M. Baxa, auditor and assistant vice president, Cloud County Bank, Concordia, Kan.— Midwest Region; Marjorie T. Coggins, vice president, Peoples Bank, Tupelo, Miss.— South Central Region; and Sarah L. Happel, assistant vice president, East Texas Bank, Longview— Southwestern Re gion. They will receive full expenses for one year of advanced banking study. MID-CONTINENT BANKER for D ecem ber, 1976 O u r n e w a d d ress is sim p le to re m e m b e r . . . "THE TALLEST BUILDING IN OKIAHOMA" Visit us on your next trip to Tulsa We want you to see what we be lieve to be the finest banking facility in the great Southwest. A banking facility designed and constructed to make bank ing easier for our customers, o u r e m p l o y e e s , and our friends like you. Bank of Oklahoma — now in our new home — the Bank of Oklahoma Tower. Truly a land mark in banking. BANK OF O K IAH O M A Bank of Oklahoma Tower P.O. Box 2300 Tulsa, Oklahoma 74192 New: (918) 588-6000 MID-CONTINENT BANKER for D ecem ber, 1976 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 53 Bank-Commercial Finance Cooperation Can O ffe r Benefits to Concerned Parties HE C O R D IA L relationships that commercial finance companies have maintained with the banking commu nity have frequently resulted in coopera tive financing efforts which offer sub stantial benefits to all parties involved. Participations develop for a number of reasons, but banks most frequently contact commercial finance firms when their client’s financial needs exceed the bank’s legal lending limit or when their client’s financial requirements exceed the bank’s willingness to provide un secured credit. Further, bankers also contact com mercial finance firms frequently when seeking to develop a source of funds for clients whose financial requirements involve collateral monitoring and con trol which the bank is not prepared to provide. An example of a recent participation involved an Illinois manufacturer which had a limited credit rating but needed substantial funding to replenish a dan gerously low supply of raw materials and improve worn-out production facil ities. The manufacturer’s bank was re luctant to provide an inventory loan since the bank did not have the staff available to monitor that risk. The bank contacted Aetna Business Credit, Inc., and the necessary financial requirements were provided in a 50% participation so that the manufacturer was able to re-equip the plant and build up inventory. Aetna provided the col lateral control required. The loan, which was collateralized in part by receivables, inventory and the new equipment, enabled the company to double its output, more than double its profit and improve its credit rating. Another example of a successful par ticipation involved a Texas beef whole saler which had reached the bank’s legal lending limit but needed addition al financing. In participation with the wholesaler’s bank, Aetna was able to provide the required funding, secured by accounts receivable. As a result, the wholesaler was able to increase his business by 20 % within six months. Both the Texas beef wholesaler and the Illinois manufacturer continued to be good customers of their banks. Another bank referred a Minnesota HC with widely scattered subsidiaries to Aetna. The HC, which needed money for expansion, had exhausted its bank credit line. T 54 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis In cooperation with the bank, Aetna was able to provide the needed fund ing, secured by the subsidiaries’ re ceivables and inventories. This arrange ment increased the company’s credit availability by almost 40%, and the borrower was eventually able to double its sales volume. The HC not only continued as a good customer of the bank but also increased its business with the bank substantially. In participation with banks, com mercial finance services have been used to help turn out new products, to ex pand markets, to improve production and for a variety of other worthwhile purposes. Over the years, borrowers, bankers and commercial finance companies have been well served by conventional par ticipations. Files of firms such as Aetna include many instances where an inter action with members of the banking community has resulted in financial as sistance for the bank’s clients— assist ance which enables the clients to im prove and expand their operations and go on to becom e successful companies. A Different Approach (Continued from page 40) was accomplished by only one of the lenders. It is felt, however, that this risk is outweighed by the other ad vantages provided by the joint-loan ap-. proach. T o this point, the primary benefits discussed have been those accruing to the bank under a joint loan versus the participation approach. The joint-loan approach also offers some definite ad vantages to the commercial finance company. One of the principal advan tages is the prospect for improved com munication between the bank and com mercial finance company as it relates to the borrower and how the loan is to be managed. As joint lenders, both are directly responsible for following close ly the affairs and condition of the bor rower. In addition, both participate in any decisions about administration and man agement of the loan which, under the participation arrangement, are usually left to the sole judgment o f the com mercial finance company. These include decisions concerning such areas as changes in the percentage advanced against collateral, frequency of report ing by the borrower, release of collater al and lending on heretofore unpledged collateral. This joint r e s p o n s i b i l i t y should offer the commercial finance company much better protection against participant attack for mismanagement than the normal participation agree ment. Another possible advantage is that a provision can be included in the agency agreement between the bank and com mercial finance company which pro vides for the commercial finance com pany to share in any offset by the bank on an equal basis. In summary, it is felt that the jointloan approach to commercial finance and bank lending preserves all the ad vantages for the three parties that were present in the participation arrange ments. At the same time, it provides a vehicle which sets forth much more clearly the exact relationship between the three parties and by so doing re duces some of the risks that have been inherent in the participation method of financing, both for the bank and the commercial finance company. * * No Ribbon Cutting: 'Giant Zipper' Ceremony Opens Convenience Center W hen First National, Des Plaines, 111., opened its “ Convenience Center,” it wanted to convey what the center’s name implies: convenience. So, instead of the conventional ribbon-cutting cere mony, the center was opened with a giant-zipper ceremony. The Convenience Center is a combi nation walk-in mini-bank and eightlane drive-up facility. Services offered are checking and savings deposits, per- sonal loan applications and payments, cashiers and travelers checks, new ac counts and check cashing. The center also offers extended hours for customer convenience. Three-day open house festivities were held after the “ unzipping.” A sweepstakes drawing was held for a color TV, CB transceiver, black-andwhite TV and digital clock; radios. MID-CONTINENT BANKER for Decem ber, 1976 Every financial advisor should know when to use Citicorp Business Credit. S im p ly put, w e p r o v id e fle x i requ irem en ts, ev en th o u g h cu rren t ble w o r k in g capital fin a n cin g tor assets needs are g r o w in g m o re y o u r clien t co m p a n ie s b y u tilizin g q u ic k ly than equity. their cu rren t w o r k in g assets. W h a t’s n o t so sim ple is k n o w in g w hen to use o u r co m m e rcia l fin an ce. S o , here’s a w o r k in g ch ecklist □ Your client is not a candidate for a traditional bank loan. T h e c o m p a n y is h ig h ly lever fo r financial advisors: a g ed ... u n d e rca p ita lize d ... has □ Your client is considering a leveraged buy-out. inadequate cash f l o w ...o r is A n a cq u isition o r divestitu re relatively y o u n g — w ith o u t a lon g-esta b lish ed financial history. C itic o r p co m m e rcia l fin an ce is a v e r y sou n d , y e t u ntraditional w h e r e y o u r clien t d o e sn ’t w a n t to answ er fo r la rge- and m ed iu m -size use his o w n d e b t capacity, full com p a n ies in these situations. It c o r p o r a te guarantee o r m ake the w o r k s like this: cash is m ad e avail entire capital outlay. able b y using the c o m p a n y ’s cu rren t □ Your client is experiencing rapid sales grow th or has highly seasonal w orking capital needs. T h e c o m p a n y in either o n e o f these situations is fa ced w ith a d ile m m a — w h ile m o r e fu n ds are n e e d e d to su p p o rt g r o w t h , the c o m p a n y ’s a b ility to b o r r o w is b e in g lim ited b y traditional w o r k in g assets (a ccou n ts receiv a b le and in v e n to ry ). T h e c o m p a n y can b o r r o w m o n e y w h e n and as it is n eed ed . C a ll us to discuss y o u r c lie n ts ’ n eed s. In D allas, o u r S o u th w e s t re p re s e n ta tiv e is E d B o n i o l, at (214) 630-1590. O r in the M id w e s t , call o u r C h i c a g o re p re se n ta tiv e , J. P. L u n d g r e n , at (312) 297-8510. CITICORP BUSINESS CREDIT INC. A subsidiary of CITICO RP o MID-CONTINENT BANKER for December, 1976 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 55 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis . . articles in Counsel are concise and timely." The current issue is stimulating and informative." 'Counsel is a real service to our institution." -LETTERS FROM OUR CUSTOMERS "This coverage in Counsel of the liability aspects of discrim inatioi in lending is must reading for all of our officers" https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Counsel, our new quarterly publication, is yet another MGIC customer service in the field of Directors' and Officers' Liability insurance. Targeted at executives of financial institutions who are protected by our policies, it provides a current over-view of the variety of liabilities to which officials are often subjected in the conduct of their duties. Counsel is written by leading academic, legal, and business authorities in the liability field. Its goal is to help our policyholders identify and examine areas of possible exposure, and so avoid them. Counsel is cogent and timely because of the fast-changing nature of the liability scene. Legislation and litigation in recent years have substantially enlarged the areas of potential exposure. So, it is clearly worth a few minutes of your time to get a thorough analysis of your current D&O coverage from MGIC. Our policies are designed specifically for financial institution executives. Unlike most other policies, they provide individual limits of liability up to policy limits, for each insured person, each year. You can select an attorney, subject to MGIC approval. And atour option, MGIC can advance you money for costly legal fees. MGIC Directors' and Officers' Liability insurance. And now Counsel. Sound reasons why we say, there's no substitute for experience. MGIC experience. (If you would like a sample copy of the current issue of Counsel, write Edward Norris at the address below.) MGIC Because experience pays. M GIC Indemnity Corporation, a Subsidiary of M GIC Investment Corporation, M GIC Plaza, Milwaukee, Wl 53201 Phone: 800-558-9900; in Wisconsin, 800-242-9275 Facts About Commercial Financing's Role In Salvaging Troublesome Bank Clients By ROBERT SCHWAAB Vice President First Wisconsin Financial Corp. Milwaukee HROU GH loan participations, com mercial finance companies can help banks solve the cash-flow requirements of accounts that are perhaps somewhat troublesome. How does a participation work? What are its advantages? These questions are best answered after reaching an understanding of what a commercial finance company is and what it does. Such a firm is a secured lender, mak ing loans primarily to manufacturers and distributors. The accounts receiv able and inventory of the borrower— and at times, the plant equipment, or a combination of these assets— gener ally becomes the collateral for the loan. Accounts-receivable financing is the method used most frequently in step ping up cash flow, for it immediately converts a non-liquid asset into cash. Accounts that normally end up as a secured credit in a finance company portfolio usually fall into two cate gories : • The fast growing business whose increased sales are accompanied by a T need for increased inventory, new equipment, larger payrolls and larger accounts receivable balances. • The firm that has experienced a reversal of some sort and needs to buy a little time to get back on its feet. In either case, the firm does not al ways have sufficient earnings to plow back into the business as working capi tal and its banker does not feel com fortable with its line, so another source of funds must be found. In such a situation, the bank’s loan officer can help his account by suggest ing he call in a secured leasing special ist to review the financial information and determine whether an alternative loan program can be put together. Chances are reasonably good that the finance company can formulate a pro gram that will enable the bank’s cus tomer to move forward as opportuni ties develop. The bank can participate in the loan package and retain the account. The participation generally runs from 10 % to a maximum of 50% of the loan. The rate of interest the bank requires is estab lished and the customer gains the ad vantage of paying the blended rate. In a participation, the benefits to the bank— although they may be obvious— are worth restating: The bank keeps the Steady Rise in Business Volume Seen By Head of Financial Trade Association LTH O U G H recent news about business conditions is not overly encouraging, LeRoy L. Kohn, chair man of the trade association for the nation’s commercial financing and fac toring firms, expects American business to continue to expand in the next few years. Based on information from fi nancial firms across the nation which day-to-day take the pulse of American business, Mr. Kohn, chairman o f the National Commercial Finance Confer ence (NCFC), predicts that the follow ing will occur: • Prices of raw materials and semi manufactured components will con tinue to rise; • Inventories held b y business will continue to increase— both in physical quantities and in dollar value; • Total sales volume will rise as the result of two pressures— inflation A 58 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis and population— and this will increase the demand for more working capital; • It will becom e increasingly ex pensive to replace capital equipment; • W age rates will continue to rise faster than output per man-hour, thus increasing the demand for capital equipment to reduce labor cost. In the view of Mr. Kohn, who is also chairman emeritus of the board of Mercantile Financial Corp., Chicago, this means that there will be continu ing pressure on the capital structure of business at all levels— manufacturing, wholesaling and retailing— for more funds. As a result, there will be greater opportunities for commercial financing and factoring companies to serve the growing needs of American business. As the trade association for the com mercial financing and factoring indus try, the NCFC represents and serves account and provides the customer with a source of funds it would not ordi narily be able to supply and the bank can earn income on the account by par ticipating in the loan. Generally, commercial finance com pany customers are rather heavily lever aged. Their debt, particularly short term, may be four or five times their net worth. For this reason, they must be watched closely. In addition, the customers are continuous borrowers, meaning they rarely pay out loans com pletely. The loans continue to revolve month-to-month and, in some cases, year-to-year. The procedures, policies and sys tems used by a commercial finance firm are in no way an absolute guaran tee against loss. However, the methods used in daily operations and field audits are designed to help keep a close watch over borrowers and to help uncover problems that could eventually lead to a loss. If a company discovers a problem in time, it may be able to help the bor rower correct the situation. Even if the problem is not discovered in ad vance, a commercial finance firm such as Wisconsin Financial Corp. is in a good position to safeguard its loan and prevent loss. There is no great mystery about commercial financing. However, it is a fairly complicated business that usually requires more administration than is necessary under normal bank lending practices. * • many companies in the field across the nation. The industry will finance about $58 billion worth of business this year. Bank Has 'Logo'-Mobile This is the rolling logo of Commerce Union Bank, N ashville, w hich the bank uses for spe cial promotions. Designed by the bank's ad agency to resem ble Com m erce Union's logo, and using an electric car a s a base, the "Mobius Band W ag o n" featu res a custom interior complete w ith tape p lay e r and CB transceiver. Shown test driving the logo-replica is Edw ard G. Nelson, bank pres. MID-CONTINENT BANKER for D ecem ber, 1976 A Heller participation loan keeps your customers’ interest in your bank. When a good customer or prospect comes to you with a loan request largerthan you may be willing to provide, you don’t have to lose him. A bank/H eller participation loan gives you the leverage to maximize your customer’s credit availability. You provide his normal banking functions, retain his deposit balances and generate interest income from your portion of the loan, typically 30% to 50% . Heller assumes responsibility for all administrative and supervisory details, plus keeps you close to the situation with periodic examination reports. Heller has been exercising this kind of financial creativity for over a half-century with banks of all sizes. Today, Heller is not only the most experienced, but very likely, the best in the business of participations. Contact the Heller office nearest you today. Your customers and prospects are too important to lose. Walter E. Heller & Company 105 W. Adams St., Chicago, III. 60690 New York • Boston • Philadelphia • Baltimore • Syracuse ‘ Detroit • St. Louis Charlotte • Kansas City • Denver • Atlanta • Miami • Birmingham New Orleans • Houston * Dallas • Phoenix • Los Angeles • San Francisco Portland • San Juan P.R. Heller services also available throuah Heller Companies in Canada and twenty other countries around the world. MID-CONTINENT BANKER for Decem ber. 1976 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 59 Oklahoma Bankers President Quits in Branching Dispute BRANCHING CONTROVERSY— marked by the resignation of Pat Moore as president of the Oklahoma Bankers Association— has erupted in the Sooner State. Mr. Moore, president, A m e r i c a n St a t e , Thomas, voluntari ly left the top OBA post late in October as the result of what he calls “ vehe ment opposition” to his work on behalf of a previously in active M u s k o g e e trust c o m p a n y , called Pioneer Sav M O O RE ings & Trust Co. Early in October, the latter firm had begun opening a network of branches in storefront shopping center offices across the state. This action brought loud outcries from various bankers in Oklahoma, which has an anti-branching law. In accepting Mr. M oore’s resignation, the OBA announced that presidential responsibilities now are being carried out by Tracy Kelly, the OBA’s chair man and immediate past president. He is president and chairman, American National, Bristow, and chairman, Citi zens State, Okemah. Therefore, the president’s post will remain vacant until the 1977 convention next May. The OBA’s board is meeting D e cember 9 to decide whether to take any action— legal or otherwise— in the Pioneer matter. On November 4, the state banking commissioner, Harry E. Leonard, after meeting with members of the state banking board, ordered Pioneer Sav ings: • To stop accepting demand de posits, opening checking accounts and issuing checks at any o f its various offices or locations. • To remove any sign at any of its various locations that would purport to identify the firm as a banking facility. • To accumulate immediately and thereafter maintain a full set of corpo rate books and records at a registered office, as required by 18 O. S. 1971, Section 1.16. • To refrain from opening any ad ditional offices or branches until Mr. Leonard or his board determines that the opening of these offices or branches will not jeopardize or impair the firm’s 60 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis By ROSEMARY McKELVEY Managing Editor ability to operate in a safe and sound manner. • To cease and desist and hereafter refrain from engaging in any operations other than those authorized specifically for corporate trust companies by pro vision of the Oklahoma Banking Code of 1965. The center of the controversy— the trust company— actually had its start in 1905, two years before Oklahoma be came a state. It was incorporated as the Pioneer Abstract & Trust Co. and was domiciled at Muskogee, then in Indian Territory. Later, the charter was can celed, but was reinstated in 1929 by the corporation commission of the state o f Oklahoma. In December, 1975, Pio neer Abstract applied to the state banking department to move its main office from Muskogee to Oklahoma City. The application was approved, subject to certain restrictions and contingent on certain conditions. Last March, a group of individuals, including Mr. Moore, purchased Pioneer Abstract and, on April 19, applied to vacate the banking board’s order to move the firm from Muskogee to Okla homa City. The board did vacate its order on May 5. Subsequently, according to Commis sioner Leonard, the firm’s management proceeded to make arrangements to open multiple offices offering to the general public “ certain bank-like ser vices, including, but not limited to, the acceptance of demand deposits, the opening o f checking accounts and the issuance of checks.” The state banking board’s cease-anddesist order says that Pioneer Abstract changed its name to Pioneer Savings & Trust Co. without the banking com missioner’s approval and filed the new name with the Oklahoma secretary of state; that Pioneer has opened branches at Muskogee, Chickasha, Clinton, Elk City, Moore, Oklahoma City, Tulsa, Edmond, Weatherford, Thomas and Sapulpa; that the firm does not main tain its main office in Muskogee, its only authorized principal place of busi ness; that it has erected, at least at one location, a sign purporting to identify the trust company as a bank; that none of the operational policies have been adopted or approved by action of its board; that its counsel and certain of its principals have admitted the com pany is subject to the jurisdiction and regulation of the state banking depart ment; that certain restrictions imposed on banks (e.g., loan limits, investment quality, reserves, etc.) don’t apply to trust companies and, thus, Pioneer is practically unlimited as to the manner in which funds may be invested; and that expenses incurred by Pioneer in opening various branches have caused substantial operating losses to the firm and future operational expenses as they relate to operational income are less than certain. On November 18, attorneys for Pio neer Savings filed an appeal from Com missioner Leonard’s order. In the mean time, Pioneer Savings continues in op eration because it was not ordered to close, but to cease operations in the five areas listed in columns one and two of this article. According to Mr. Moore, the Pioneer venture represents a means of servicing credit-worthy borrowers in small Okla homa communities who have been de nied access to loans from banks and other financial institutions for a variety of reasons, one of which is the state’s prohibition of branching. Mr. Moore said he resigned his OBA post “ so there would be no question in the minds of the association’s con stituents about my association with Pioneer Savings & Trust Co.” Pioneer’s p r e s i d e n t is H. Dale Schroeder, who was a senior vice presi dent in the correspondent banking de partment at Oklahoma City’s Liberty National before joining Pioneer last Feb ruary. Pioneer’s executive vice president is James E. Talkington, formerly an as sistant vice president in correspondent banking at Liberty National. ® * Bank Finds Many Takers During $2-Bill Promotion Everybody’s doing it, officials of Main Bank, Chicago, say— taking $2 bills in change, that is. The bank has instituted a policy of giving $2 bills in change to customers who cash their paychecks there. On the first day o f the “ Main Bank Is a $2Bill Bank” promotion, officials state, people ranging in life-style from ma chine operator to school teacher to sculptor accepted the bills cheerfully. During the promotion’s first week, bank officials say, more than 1,900 of the $2 bills were distributed, a figure that is expected to remain constant. MID-CONTINENT BANKER for December, 1976 of working with each of you strongest MID-CONTINENT BANKER fo r D ecem ber, 1976 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis OVER $85,000,000 CAPITAL STRUCTURE / MEMBER F.D.I.C. A SUBSIDIARY OF FIRST OKLAHOMA BANCORPORATION, INC. Sizab le Ja p a n e se delegation attended BMA convention. Chatting w ith tw o of them— M asam i Yam am oto (2nd from I.), Financial In form ation System Ltd., and Isao K urata (2nd from r.), Financial A ffairs Co., Ltd., both in Tokyo—a re Raym ond Cheseldine (I.), BMA e.v.p ., and Clifford Y . D avis Jr., new BMA Pres., and v.p.. City N at'l, Mem phis. m/m Gaining Competitive Edge Is Theme O f BMA's 61st Convention BANKER should not think of his institution as an all-customer super bank if he wants the institution to find an effective position in its market. This was the keynote message pre sented to bankers attending last month’s 61st annual Bank Marketing Associa tion convention, held in Miami Beach. It was delivered by Philip Kotier, Harold T. Martin professor of market ing at the Graduate School of Manage ment, Northwestern University. Theme of the convention was “ Gaining the Competitive Edge.” Mr. Kotier described positioning as an effort by banks to fit into a distinct part of the market in a superior way. A bank that tries to be the best for every pocket, purse and personality is engaged in a hopeless task, he said. If it persists in such a course of ac tion, he said, it will run second in all markets where there are well-positioned banks. Banks that are not market-positioned, he continued, tend to be left with a A By LAWRENCE W. COLBERT Assistant to the Publisher “ floating crowd of undiscriminating cus tomers who are here today and gone tomorrow.” He cautioned banks that they should begin to think small in the sense of recognizing and catering to different classes of customer need. “ Instead of focusing on product profitability, banks must start to think o f customer class profitability. Customers are the banks’ only profit centers,” he said. For a bank to develop market posi tioning strategy, he said, its information system must produce facts on the re spective profitability of small merchants, small manufacturers, real estate opera tors, blue collar workers, white collar workers and other groups. Furthermore, he said, this customer class profitability must be estimated over the business cycle, not only in periods of easy or tight money. In another session, Almarin Phillips, dean of the School o f Public and Urban Policy, University of Pennsylvania, and a member of the National Commission on EFT, warned that court decisions that electronic terminals are branches could create an illusion among bankers that the protections of the M cFadden Act against competition stemming from electronic systems are still effective. “ EFT is coming. It will be less and less possible to have interindustry and interstate protections,” he said. He said he was not speaking for the commission. He called on the Fed to change in response to E FT developments. “ De mand deposits are going out the win dow,” he said, and controlling M I will be impossible unless radical changes are made in the method of implement ing monetary policy. One way would be to use the pay ment of interest on reserves as a method of control, substituting it largely for open-market policy. Thus, if it were desired to immobilize large amounts of the reserves in the banking system, higher rates of interest would be paid to banks to retain them, and the re verse policy would be follow ed to free reserves, he said. Mark G. Bender, senior staff econo mist for the E FT commission, gave Taking part in EFTS session at BMA conven tion w ere (from I.) John F. Fisher, v.p.. First Banc Group of O hio, Colum bus; Kerry P. Curtis, v.p., Bank of A m erica, San Francisco; Richard I. Doolittle, adm inistrator, G ra d u ate School of Banking, University of W isconsin, M adison; and A lm arin Phillips, dean. School of Public & U rban Policy, U niversity o f P enn sylvan ia, P hiladelph ia. 62 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis MID-CONTINENT BANKER fo r D ecem ber, 1976 W E'RE HELPING TO BUILD-UP THIS PART O F O UR GREAT L A N D . W E'RE W ITH Y O U , EVERYW H ERE! AMERICAN NATIONAL f\ National Correspondent Division Chattanooga, Tennessee 37402 Phone l-(800) 572-7308 in Tennessee or l-(800) 251-6266 in all adjacent states M ID-CONTINENT BANKER for D ecem ber, 1976 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis delegates an update on the commission’s operations. Since March-April of this year, he said, the commission has held formal meetings of one form or another about four times per month. This activity has resulted in staff-developed papers, reso lutions, a series of planned public hear ings and a commitment to have an interim report ready for the president and Congress by February 23, 1977. The report is expected to deal with the following issues: advantages and disadvantages of E FT to the consumer, the role of government in operating E FT systems, the status of electronic terminals as branches, E F T ’s competi tive impact, vendor-related EFT is sues, EFT and monetary policy, the cost-benefit relationship of EFT and the lessons to be drawn from Europeantype GIRO systems. Jack W . Whittle, outgoing chairman of the financial advertising committee on ethics, told bankers that “we can’t expect to keep the regulators out of our hip pocket unless we clean up our industry.” The committee recently published a bank advertising code of ethics. The code states that a “ financial advertise ment is ethical when it is truthful and when it contains information that the intended audience can reasonably be expected to understand when making an intelligent purchase decision. It is not necessary for a financial advertise ment to contain all the facts about a service because of media physical limi tations. However, any features, terms (including p rice), or any purchaser benefits must be presented in a manner that does not mislead by what is stated or what is omitted.” The guidelines specifically state that when “ free” checking accounts are o f fered, there must be no charge for those aspects which are internal parts of the service. This includes no charge if a balance falls below a certain level. It also prohibits tie-ins such as charge cards or debit cards or savings instru ments on checking accounts that are advertised as free. Mr. Whittle said that some banks offering free checking have been forced to clarify the service because some bankers have redefined the word “ free” by adding “ anything else into it you felt you can get away with.” Mr. Whittle reported that banker acceptance of the code of ethics has been favorable. Sun Banks of Florida, Inc., captured the “ best of show” trophy in the ninth annual Golden Coin Awards competi tion at the convention. The firm took top honors with its entry in the public 2021 Eastern Ave. Cincinnati, Ohio 45202 13) 221-8400 YOUR MUSICAL SIGN... That is exactly what the Town Crier carillon offers your fi nancial institution.The beauti ful sounds of bells is a unique gift to your community — one to be treasured for years to com e. But it is also a totally different kind of sign — a musical sign that m akes an im pression without ever being seen. No matter where your customers are, the W e stm in ste r Chimes and hour strike reach them daily. Concerts of favorite music are an added reminder of your com munity involvem ent during special celebrations.TheTown Crier carillon is a distinctive way to make your voice heard constantly at a very minimal cost. Call Jim Livingston col lect at (513) 221-8400 for complete details on the Town Crier program available now from the I. T. Verdin Company. 64 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis affairs category for banks with total assets of $1 billion or more. Its entry was entitled “ Thumbs Up, Florida,” and is a multi-faceted campaign sym bolizing a return to prosperity and posi tive thinking during the recent recession. Banks in the Mid-Continent area re ceiving certificates of merit in the marketing category include Bank of Naperville, 111., for its “ Selling the Business Savings Account,” and First Citizens National, Tupelo, Miss., for its "N ew Automobile Loan Program.” Among the certificate winners in the public affairs category was First Bank & Trust, South Bend, Ind., for its “ Tel M oney: A Unique Public Service Pro viding Financial Information and Coun seling Over the Telephone” program. Ten Mid-Continent area banks were included among the “ Best of T V ” com mercial winners. They were First Ala bama Bank, Montgomery; Fort Worth National; Harris Bank, Chicago; Bank of New Orleans; First National of Sulli van County, Kingsport, Tenn.; Ex change National, Chicago; Louisiana National, Baton Rouge; Worthen Bank, Little Rock; Central Bancshares of the South, Birmingham, Ala.; and Whitney National, New Orleans. Clifford Y. Davis Jr., vice president, City National, Memphis, was installed as new BMA president at the conven tion. Installed with Mr. Davis were Martin J. Allen Jr., senior vice presi dent-director of marketing, Old Kent Bank, Grand Rapids, Mich.-—first vice president; Arthur B. Ziegler, executive vice president, Marine Midland Bank, Buffalo— second vice president; and Jack W . Whittle, chairman, Whittle Group, Chicago. Air. Whittle is serving a second term. • * Balloons Rise to Occasion A ly ssa Drugis, age 3V2, and her father assist staffers of First Security Bank, W ood Dale, III. (from I.), Barb LaJone, bookkeeper supervisor, Anthony DeM aria, pres., and Diane Perkinson, head teller, in the launching of helium-filled balloons during the institution's fifth-anniver sary celebration. Attached to the balloons are post cards good for $5 when returned to the bank. MID-CONTINENT BANKER fo r Decem ber, 1976 Put our staff on your staff. Som etim es it takes m ore than one to reach a goal. T hat is where the Whitney com es in. For over 90 years, the Whitney reputation for sound banking knowledge and reliability has been a strong factor for success in correspondent banking. T he Whitney would welcome the opportunity to join with your organization to achieve m utual goals. MID-CONTINENT BANKER for December, 1976 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Reliability in banking since 1883 65 Changes Facing the Banking Industry Spotlighted at Correspondent Meeting was focused on the technological, social, legislative and regulatory changes facing the banking industry at the ABA’s 1976 National Correspondent Banking Conference, held last month in Dallas. About 400 bankers attended. Emphasis was given to how the changes facing banking will affect inter bank relationships. Conference keynoter was Walter B. Wriston, chairman, Citibank, New York. He listed three trends that he sees as having “ enormous momentum” and the management of which will be an “ enormous task.” These include the fact that there is erosion between the dif ferences of banks and thrifts, that there is a breaking down of geographical lines within which banks traditionally operate and that technology will soon enable banks to be relieved of the high cost of servicing retail c u s to m e r s through branching systems as they are now known. Following Mr. Wriston was J. W . McLean, chairman, Liberty National, Oklahoma City, who delivered an opti mistic address designed to inform cor respondent bankers how to be more effective in dealing with the key on going issues confronting them. He said the challenge has never been more formidable. He assured his listeners that today’s problem areas, such as regulatory trends, competitive structure and techno logical change, do not present a hope less picture— provided bankers tackle these problems by striving to gain an understanding of a basic management principal, which he termed “ cherry pickin.” His definition of “ cherry pickin” is a five-step management process that in cludes research, goal setting, planning to achieve goals, implementation of plans and measurement of results. Conference Chairman John F. In gram Jr., senior vice president, Citizens & Southern National, Atlanta, spoke on the opportunities facing the correspon dent banking system today. "One must agree that,” he said, “ by selecting the proper correspondent, a respondent bank today has an excellent opportunity to improve its earnings and performance. t t e n t io n A 66 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis By LAWRENCE W. COLBERT Assistant to the Publisher “ The day has long passed when our respondent banks could operate under the impression that correspondent ser vices were unnecessary except for check clearing. Daily, the extension of credit becomes more complex. As dollar amounts increase each year, so do de mands for participation in overlines.” The training process for bankers can come largely from correspondents who offer training in consumer and com mercial credit as well as personnel and productivity seminars, he said. “ The field of EFTS, once a ‘thought for the future,’ is now a real factor in our day-to-day operation. By utilizing the correspondent bank, the respondent can provide his customer with the same E FT service that is offered by the large money-center banks.” When a respondent banker selects his correspondent, he is, in effect making an investment, he said, “ and we must prove ourselves to be worthy of that investment.” The respondent not only compares the advantages and disad vantages of the various systems and services offered, but he also compares the qualities of the calling officer, he said. These reasons alone make the corre spondent banking relationship one of the closest in banking— perhaps better described as a “ close personal relation ship highlighted by professionalism.” A respondent customer will ask how his correspondent can help his bank ad vance, he said. He will want to know what additional services are available from which his customers can benefit. And the respondent is counting on his correspondent banker to keep pace with the industry. These factors combine many elements of banking know-how, character and a high degree of excel lence into what we call a “ correspon dent relationship.” Speaking on “ Monitoring and Con trolling Interbank Credit,” Mason E. Mitchell, executive vice president, Re public National, Dallas, said that inter bank credit rose from about $6 billion in 1967 to nearly $50 billion by 1974, exclusive of interbank deposits. This in crease, he said, can only lead to the conclusion that “ we are our own largest customers.” He said the banking system’s greatest industry exposure is the banking system itself and added that there is a general consensus that many bankers have a long way to go in monitoring and policing interbank credit. He asked bankers to look at their banks to see the areas of exposure that exist. He made it clear he was not sug gesting that banks maintain monitoring systems that reflect absolute exposure, but that procedures are needed that will enable bankers to have knowledge as a current basis of the major areas of exposure. He said that most banks are not on line in monitoring their current ex posure condition. Rather, they rely on reports that reflect usage and activity on a periodic basis— either monthly or quarterly. He told how banks can put them selves in a strong position to react quickly when their transactions with a certain institution become troublesome, providing they have a reliable means of determining their current exposure con dition. Those in attendance heard Barry M. Johnson, second vice president, Conti nental Illinois National, Chicago, state that the providing of investment port folio advice is an opportunity to assist respondents that will continue to de mand the attention of correspondent banks. Trends toward technical specializa tion, the pressures for improved per formance and market volatility are some of the important factors underlying the recognition of this need by respondents, he said. A new impetus is also derived from increasing attention to investment poli cies and management practices on the part of regulatory authorities. While the need of, respondents for assistance in investments management is evident, he continued, the manner in which a correspondent should pro vide assistance is not. He called on correspondent banks to develop ef fective programs to assist respondents in managing their investments. The viewpoint of the small bank was given during a portion of the confer- MID-CONTINENT BANKER for December, 1976 In correspondent banking services, we’re the specialists. Here’s how First Chicago, a $19 billion banking corporation, can help you serve your customers more productively. You know what your correspondent banking needs are. You also know what services your present correspondent bank provides. Check this list of First Chicago's com prehensive services. See if there aren't many ways we can work together more productively. Then call a correspondent banker at First Chicago, (312) 732-4101, or write us. DATA PROCESSING Point-of-Sale Techniques Bank Accounting Services Bank Information Systems Electronic Funds Transfers CREDIT FACILITIES Holding Com pany Lines of Credit Participations: Upstream and Downstream Intermediate Term Credit Liquidity Lines of Credit Commercial Finance Services: Inventory and Receivable Financing Corporate Financing Advisory Services Leasing Activities and Analysis Credit Information Small Business Administration: Loan Counsel MANAGEMENT ASSISTANCE Loan Portfolio Review Techniques Economic Forecasting Profit Planning and Forecasting Marketing and Business Developm ent Advice Personnel Assistance Operations Planning Organization Planning SPECIAL CORRESPONDENT SERVICES Annual Correspondent Conference Account Referrals Mini-conferences and Workshops, Special Events Planning Record Retention and Reconstruction Cash Management Consulting: Collection, Concentration, Disbursement and Control FOCUS: Lockbox Location Model Visual Aids: Slides and Closed Circuit TV Production TRUST BANKING Personal and Corporate Trust Services Trust Investment Advisory Services Monthly Investment Services Stock Transfer and Shareholders Services Dividend Reinvestment PERSONAL BANKING ASSISTANCE Bank Promotions YES Card™ BankAmericard® Savings Programs Automobile Leasing Program Bank-At-Work/Direct Deposit Program OPERATIONAL SERVICES Cash Letter Clearings: End-Point & Float Analyses Coin and Currency Collections Money Transfer Federal Reserve On-Line Settlement Securities Custody Security and Coupon Collection Payroll Accounting INVESTMENTS Government Securities Municipals Federal Agency Securities Federal Funds Repurchase Agreements Commercial Paper Certificates of Deposit Treasury Tax and Loan Accounts Money Desk Reviews Portfolio Analysis Services INTERNATIONAL BANKING Worldwide Locations Merchant Banking Money Market Instruments Letters of Credit Foreign Exchange Transactions Transfers and Remittances Ex-Im Financing FirstChicago The First National Bank of Chicago Productive services for banks and bank holding companies. MEMBER FDIC MID-CONTINENT BANKER for December, 1976 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 67 Som etim es enough N e w a r k ’s enough It really is The Big Apple. The Barclay is a small east s There really are a hundred places to (The lobby is about fifty steps find Szechwan oysters, kinesiology The Big Conference Room he classes, maritime lawyers or a Spode twenty people.) gravy boat like the kids broke. The Barclay is elegant withe But sometimes New York can get to stuffy, expensive without be too much of a good thing. being ridiculous. Unless you know somewhere to hide. Next time you need to get i Welcome to The Barclay. New York, remember The Bai When enough New York’s enough. 48th just off Park. (800) 221-2690. In New York State, call (800) 522-6449. In the city 755-5900. Call your corporate travel office or travel agent. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis ence devoted to EFTS. W . G. Kirchner, chairman, Richfield (M inn.) Bank, asked upstream correspondent banks to put themselves in the shoes of their small respondents and view the EFT situation from such a vantage point. He explained the fears small banks have of being swallowed up by E FT networks as envisioned by large banks. He said that an institution that operates in a non-branch state is inclined to re gard ATM units as an elimination of the non-branching system and states that have some form o f limited branch ing can interpret ATMs as extending those limitations. He said that small banks are being pressed to increase capital by regu lators, which precludes their spending disproportionate amounts on EFT sys tems, even if the systems are shared. A small participating bank is forced to go along with the rules made by the big bank, he said, and there is always the fear that the big bank will someday tell the small bank that it doesn’t want to bother with the problems caused by sharing a network. He also reminded the audience that any EFT system would eventually undermine the personal relationships that small bankers have with their cus tomers, due to the greater convenience of having ATM s and POS units scat tered throughout the trade areas of the smaller banks. "As large correspondent banks,” he said, “ we urge you to be aware of the dilemma for your small correspondent neighbors, and to join in a unified front to legislatively define the place of the ATM and the POS in our total banking system. “The federal government must pro vide a control so the states can provide a competitive framework adapted to the individual state and workable for the giant billion-dollar bank or the small $10 million bank. “ Unless the commercial banking in dustry joins ranks and moves together, the momentum of other types of fi nancial institutions will prevail and commercial banks will end in a secondor third-rank position. Large institutions cannot rely on the marketplace alone and still expect the support of the small institutions in this change that will set the pattern of banking for many years to come.” Next year’s conference is set for New Orleans. * * New Illinois Facility Bill Examined During Banking Update 7 6 Seminar and c o m p e t i t iv e changes in the Illinois banking en vironment were highlighted in “ Illinois Banking Update 76,” a seminar spon sored recently by Financial Shares Corp., Chicago-based bank marketing and educational consulting firm. The state’s new facility law, status of competitive credit institutions and outlook for bond portfolios were among topics discussed at the day-long ses sion. Speakers included economist and bank consultant Milton J. Hayes; Rich ard Ensweiler, president, Illinois Credit Union League; George K. Allison, ex ecutive vice president, First Federal S&L, Chicago; Robert P. Abate, chair man, Elgin National; Robert L. Sehutt, president, Bank Consultants of Ameri ca, Denver; and Marvin E. Knedler, president, Knedler & Associates, Archi tects, Denver. Also on the panel were Joseph Ciaccio, Illinois deputy commissioner of banks and trust companies; W . Har lan Sarsfield, FDIC assistant regional L e g is l a t iv e director, Chicago; John Sherry, chief counsel, regional administrator of na tional banks, Chicago r e g io n , and George M. Morvis, president, Financial Shares Corp. Implications of Bill. House Bill 1955, the facility bill which became effective in Illinois October 1, was reviewed ex tensively. Basically, the new bill per mits banks to set up two limited-service facilities within two miles of their main offices. Commissioner Ciaccio pointed out that although the state required no formal application procedure, banks must comply with several conditions. First, the facility should have the p o tential of being profitable in and of itself. “ W e re concerned about the brick and mortar expenditures of a bank fa cility,” he said. “ If the fixed-asset in vestment in a facility exceeds 50% of a bank’s capital structure, prior approval must be obtained from the Illinois com missioner of banks and trust compa nies.” Several other aspects of the bill were Robert Sehutt (I.), pres., Bank Consultants of Am erica, Denver, visits w ith Jeffrey H. Cole, operations officer, M id-Am erica N at'l, Chicago, during "Illin o is Banking U pdate ’ 7 6 " sem inar, sponsored by Financial Shares Corp., Chicago. discussed by Mr. Ciaccio. Regarding the “ 600-foot protection clause,” Mr. Ciaccio said that this is “ home office protection only.” In other words, “ D if ferent banks may build facilities right We’ll write every newspaper ad and radio spot you need . . . for $ 2 ,7 9 5 ! C h o o se from one of our proven themes, or yours, and we’ll C U S T O M I Z E a total advertising campaign for Y O U R market. Call Dale Krebbs •3 5 CUSTO M ADS (Ready to run) • 7 0 R A D IO S P O T S • C U S T O M M U S IC A L J I N G L E • C O M M U N IT Y IN V O L V E M E N T • T E L E P H O N E C O N S U L T A T IO N 9- O N CO C\J Our programs have been selected by over 300 banks. (3 1 6 ) 684-0461 CO 9 .c •rt 00 CO CO CO n CO c O CO CM C r-* iT CD u ~ CO - 5 co c CO CO c o CO* £ ■- Cl) -C H-. o- O MID-CONTINENT BANKER for December, 1976 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 69 N OW For O nly $252 You May Purchase This Valuable Manual As a Guide for Your Board of Directors! A Model Policy for a Bank's Board of Directors This 24-p ag e booklet w ill be a va lu a b le addition to your ban k's lib ra ry, for it contains a w e alth of inform ation that w ill aid you r bo ard and your top m an agem ent in o rg an izatio n al problem s. Here a re som e of the sections it contains: 1. A ty p ica l organ izational chart. 2. Duties and respon sibilities of m an a gin g officers and various standing com m ittees. 3. M an a g e m e n t philosophy. 4. Policies to be a d o p te d by the bo ard . 5. O p e ra tio n and po licies for the loan and discou nt com m ittee. 6. Lo an, investm ent and co llectio n pol icie s. 7. O u tlin e p o licy. of a sug gested investm ent Every bank should have a written set of policies ap proved and adopted by the board. This manual can help your bank in preparing such a manual or in updating the manual you now have in op eration. SEND Y O U R ORDER AN D CH EC K (sorry, no billed orders) TO THE PUBLISHER: The BANK BOARD Letter 408 O live St. (Room 505) St. Louis, Mo. 63102 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis next door to each other; but they must keep 600 feet away from a competitor’s main office.” While the state requires no formal application, the FD IC “will process fa cility applications the same way we would for a branch application,” ac cording to Harlan Sarsfield of the FDIC. Mr. Sarsfield said there are six basic factors the FD IC will take into con sideration when hearing a facility ap plication. They are: 1. A bank’s finan cial history and condition. 2. Capital adequacy. 3. Earnings. 4. Management factor. 5. Actual convenience of the proposed facility. 6. Attitude of the state banking authority (that no objec tion is raised ). John Sherry emphasized that the Comptroller’s office would treat nation al bank facility applications as it would branch applications. “ W e especially will look into the overall effect of a fa cility on a bank’s profitability,” he said. All the regulators seemed to feel that if a facility was found to be in the pub lic interest and did not impair the bank’s capital structure, Illinois insti tutions could take advantage of the bill without too much red tape. Nonregulatory Aspects. In turning to nonregulatory aspects of the facility bill, Robert Schutt of Bank Consultants of America stated that not every bank should or can have a facility. “ The law simply says that you mai/,” he empha sized, adding that “ there’s not much reason to have a facility unless it posi tively affects the bottom line.” Factors Mr. Schutt said should be appraised before constructing a facility include: 1. Capital funds. 2. Fixed as sets, exclusive of the building. 3. In vestment in land and new building. 4. Depreciation. 5. Effect of a facility on the dividend picture. 6. Cost of owning versus leasing the building. 7. The facility’s usefulness if legislation changes. Overall, said Mr. Schutt, you should “look at the facility investment with the same objective as a bank’s invest ment in bonds.” George Morvis, president, Financial Shares Corp., looked at the facility from the viewpoint of a bank customer. Convenience is still the primary reason people choose a bank; therefore, banks must be sure that the ultimate facility site selected should consider such fac tors as nearby housing, traffic flow, population patterns and retail trade volume, he said. As far as locating the facility, there are profitable ways to utilize various types of available sites, according to Marvin Knedler, president, M. E. Knedler & Associates. Mr. Knedler empha sized that many locations, sizes and di mensions of sites were feasible, “ as long as there was room to get the traf fic off the street.” Stack-up space both before and after the drive-up windows is essential, he said. During his pre sentation, Mr. Knedler reviewed ex amples of facilities designed to utilize a wide variety of locations and types of sites. Status of S&Ls, Credit Unions. The competitive picture among Illinois fi nancial institutions was discussed by Credit Union League President Dick Ensweiler and George Allison, execu tive vice president, First Federal S&L, Chicago. Mr. Ensweiler said that while credit union assets are relatively small, they are increasing rapidly. In Illinois, for example, there was a 90% gain over the last five years, and, he added, there are approximately 1.5 million credit union members in the state. Instead o f directly competing with credit unions, banks should look into services they can provide credit un ions, said Mr. Ensweiler. Services similar to those offered to a correspondent bank would be welcome, said Mr. Ensweiler. E FT and other “volume sensitive” services are exam ples, he said. Direct deposit of payroll and share drafts are others. Finally, he continued, when dealing with credit unions, banks should remember that many are run with part-time people who will feel uncomfortable dealing with outside vendors. Managers, therefore, will look to their state credit union league for advice. It will benefit banks to go to the league before contacting individuals, said Mr. Ensweiler. He added that state leagues will participate with banks in developing services especially for credit unions. S&Ls are looking for new services at realistic costs, said Mr. Allison. Some new services, such as NINOW S, just aren’t producing the volume to justify their cost, “ and we don’t want to give the store away.” “ W e are not experts in all fields,” he said, “ and there is plenty of business available without our having to worry about becom ing banks or becoming credit unions.” Mr. Allison said federal S&Ls in Illi nois already are committed to branch ing, and his institution is positioning itself in the Chicago statistical metro politan suburban area (SM SA) with over 20 branches. Bond Portfolios Analyzed. Projected effects of the presidential election and key economic factors of the 1976-1977 bond market were analyzed by Milton J. Hayes, economist and a consultant to American National, Chicago. He recommended acquisition of 10-year government bonds at 8% and caution in selection of both tax-exempt and corporate bonds. * * MID-CONTINENT BANKER for December, 3976 Simplify your handling of Self-Employed Retirement Plans with the Harris Keogh/ IRA Service. While many bankers are discovering that Keogh and IRA deposits build rapidly, they are also discovering that complying with pension legislation (ERISA) and rule changes promulgated by the Department of Labor and the 1RS create extra administrative burdens. T H E K IS P R O G R A M Our KIS (Keogh/IRA Service) package is designed to simplify your administrative duties by providing you with all the Keogh documents and forms needed to start a program or to alter your present plan to conform with current legislative requirements. T H E K IS P A C K A G E Included in the program are the following documents contained in the KIS "paper package": • • • • Sample Keogh Plan Document Suggested Keogh Summary Plan Description Adoption Agreement and Forms Sample Government Reporting and Disclosure Forms • Administrative Suggestions • Keogh and IRA Regulations • Communiqués to Keep You Up to Date on Changes Affecting Keogh/IRA Programs • Telephone Consultations with Harris Keogh/IRA Specialists Even if you presently have a Keogh Plan which complies with ERISA, an abbreviated KIS package can provide you with features which will prove invaluable in your day-to-day operations. ANY Q U E S T IO N S ? If you have questions about any facet of the KIS program, call David A. Sturdy, 312/461-2576. KIS could be exactly what you've been looking for. HARRIS BANK. H a r r is T ru st a n d S a v i n g s B a n k , 111 W M o n r o e S t . C h i c a g o . Ill 6 0 6 9 0 MID-CONTINENT BANKER for December, 1976 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis M e m b e r F D I C ., F e d e r a l R e s e r v e S y s t e m 71 From I., conference ch. Fred N. Coulson Jr., s.v.p ., host bank; Jam es M. Kem per Jr., ch., host ban k; A r thur M. O kun, con sultant, Donaldson, Lufkin & Jenrette Se curities Corp., New York City. Mr. Okun reported on state of U. S. economy under each of presidential can didates at Com merce Bank corre spondent conference. Economy Looks Good for Long Term, Economist Tells Commerce Conference By JIM FABIAN Associate Editor HINGS W IL L get worse before they get better, said an economist at last month’s correspondent bank con ference sponsored by Commerce Bank, Kansas City. It was one of the first economic forecasts of the season, and it was a somewhat surprising one. The forecaster was Gert von der Linde, senior vice president and chief economist at Donaldson, Lufkin & Jen rette Securities Corp., New York City. He shared the podium with Arthur M. Okun, a consultant with the same firm, and former economic adviser to Presi dent Lyndon Johnson. Mr. von der Linde predicted higher unemployment and declining profits for the fourth quarter, perpetuating the current economic slowdown. The fourth quarter performance will affect inven tory building and capital expansion plans, he said. A m ood of disappointment will en velop business, he continued, and when the shock becomes servere enough, change will be instituted. This change will result in an accelerating recovery in 1978 and 1979, with the inflation rate dropping to about 2 %. One cause of the current pause, or lull, he said, is the fact that consumers are increasing their spending at a dis appointing rate. There will be no thrust to capital spending until early next year and housing will continue weak. In ad dition, he said, exports will weaken. This flies in the face of the general assumption made last year that 1976 would be a typical election year— one with a good recovery. It started out that way, but, partly due to underspending on the part of the Ford Administration, T 72 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis the recovery lost most of its steam, the speaker said. Mr. von der Linde predicted a Fed funds rate of 4 /2% until next March, a lower treasury bill rate, a prime rate re maining at 6/4% or 6 /2% until next June. Long-term yields will be lower— from 7% to 8 % into 1978. The country will record a 6 % rate o f growth in 1978-79 and the inflation rate will be stable, re sulting in lower interest rates. He said the inflationary decade could well be behind us. Anticipation of what’s in store for the future is worth a few more bad months, he concluded. The nearly 700 bankers attending the conference at Crown Center in Kansas City did some predicting of their own for 1977, as follows: • General business conditions in 1977 will be better (52%), worse (4%) or about the same (44%). • The inflation rate will be better (10%), worse (36%) or about the same (54%). • The unemployment rate will be greater (9%), less (38%) or about the same (53%). • Short-term interest rates will be higher (58%), lower (7%) or about the same (35%). • Long-term rates will be higher (41%), lower (13%) or about the same (46%). • W heat prices will be over $2.50 per bushel (48%), over $3 per bushel (40%). 4% predicted a price o f $2.25. • Corn prices will be over $2 (49%), over $2.50 (47%) or over $3 (3%). 1% voted for a price of $1.75. • Cattle prices will be higher (73%), lower ( 8 %) or about the same (19%). • The prime rate by next July will be 7 /2% (38%), 7% (30%), 8% (21%), 6 h% ( 6 %). • The fed funds rate by next July will stand at 6 % (34%), 5h% (31%)', 5% (15%), m% (i i% ) . Regarding conditions at their own banks, respondents reported that total deposits would be higher and the loanto-deposit ratio, the need for overline assistance and earnings would be about the same. Two-thirds of the bankers expected Gerald Ford to be elected! The majority o f bankers do not plan to participate in an E FT system during 1977, while 35% do plan such participa tion. 24% were undecided. 69% said their participation would be with other banks. Other highlights of the conference: • A buyers’ market is ahead in the loan area, according to David Rismiller, executive vice president. Interest rates will be in the 0 /2% to 7 /2% prime range. G ood organization, effective controls and tight planning are musts for a profitable commercial lending operation. • Individual consumers are not well served b y banks, according to Frank Boesche, senior vice president. Bankers must identify the consumer’s problems, research solutions and implement them. The consumer side of banking is the major source of funds. Bankers are cur rently over-oriented toward large ac counts. Depositors are concerned about the cost of using a bank’s services. They’re interested in what the bank’s service can do for them. Mere con venience isn’t enough anymore. • Commerce Bank will becom e a dual-charge card organization in the next few months. It plans to join Credit Com m erce Bank Pres. P. V . M iller Jr. (I.) and luncheon sp e a k er Gert von der Linde, s.v.p. & chief econom ist, D onald son, Lufkin & Jen rette, at Commerce Bank correspondent conference. MID-CONTINENT BANKER for December, 1976 We’re giving our competition a warning . . . here come Lynn, Gus and Jim. Three of the most experienced and successful correspondent bankers anywhere are now heading the Corres pondent Bank Department at the same bank . . . Memphis Bank & Trust. They do it all, right down the list, with a full staff behind them: Transit Operations, Credit Assistance, Investments, Bond Portfolio Analysis, Safekeeping, Trust Services, Data Processing, Business Referrals . . . and a few surprises like expert insurance capability, guidance in the construction and design of bank facilities, furniture, d e co r. . . even supplies. Now that’s correspondent banking with a flourish. We were good before. Now we’re terrific. Lynn Hobson, Vice President Gus Morris, Vice President Jim Newman, Vice President Call toll-free and they’ll rush to your rescue. In Tennessee, 1-800-582-6277. In other states, 1-800-238-7477. THE THREE MB&TEERS Memphis Bank & Trust Correspondent Department MID-CONTINENT BANKER for December, 1976 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 73 Systems, Inc., in the near future and will issue Master Charge cards in addi tion to BankAmericards, which will go through a name-change operation early next year. • Investments are becom ing more important in the current climate, said John Brown, executive vice president. Longer-term bonds are being purchased to offset the costs involved with CDs. This has brought on a new dilemma: H ow can banks go long-term and still have funds available when loan demand picks up? • Considerable concern exists among bankers about the municipal and gov ernment securities situation, according to Walter Knowles, senior vice presi dent. Banks can be “taken” in this area unless they know with whom they are dealing and unless they ask questions and insist on audited financial state ments. • A municipal credit analyst can in crease a bank’s profits, said Linda C ope land, municipal research analyst. Such a person can help a bank avoid weak credits and enable it to select securities that will improve during the investment period. This is important, since the old standby theories about municipals are no longer valid. John Wells, vice president and di rector of personnel, gave a hair-raising presentation of the wage and hour in vestigation procedure that the Labor Department inflicts on business firms. He advised that the burden of proof is always on the employer and cautioned bankers to have written policies and procedures regarding pay policies. A bank may have done nothing wrong, but it can still be fined if it has no docu mentation, he said. E d Lewis, vice president, reported on ag loans. He said net farm income is down $20 million this year, that world wide grain production is up 13% over last year, that the U. S. wheat crop came in just under last year’s totals, that the U. S. corn crop will be larger than projected by the USDA. He said the hog picture is not bright, even though pigs are up 18% over a year ago and farrowing intentions are up 20%. Broiler/ turkeys are up 10%, the threeyear down-cycle for cattle is near its bottoming, cattle slaughter will be 10 million for the year. The reduced calf crop bids well for the long-term and most overfed cattle have been slaugh tered, he said. * * CCL Designation Awarded To Bankers From Area Through ABA Program The American Bankers Association has announced the new Certified Com mercial Lender (C C L ) designees. The CCL program is sponsored by the ABA’s Commercial Lending Division and is administered by a 10-member accreditation board of bankers from ev ery section of the nation. The CCL program is designed to raise professional standards and im prove banking’s commercial lending function by identifying, examining and recognizing persons with high levels of knowledge on the techniques and functions of commercial lending. Officers of ABA member-banks and qualified employees of federal and state agencies having five years’ commercial lending experience are eligible to take the CCL examination. Following is a list of Mid-Continentarea bankers that are newly designated CCLs: ALA B A M A : J. M. Barrett, pres, and ch., First N at'l, W etum pka; W illiam W. C ox, v.p., First A la b a m a Bank, Birm ingham ; Robert E. W illiam s, corp. In. off., First A la b a m a Bancshares, Inc., M ontgomery. AR KAN SAS: Neil Nelson, pres.. Peoples Bank, Mountain Home. ILLIN OIS: Everett J. Christopher, pres., First N at'l, Trium ph; Lew is H. C lausen, pres., C h am paign N at'l; Paul A. H artm ann, a .v .p ., M er chandise N at'l, C hicag o; Terence A. Lenio, a .v.p ., Bank of N orthfield; M elvin K. Lippe, v. ch., Exchange N at'l, C hicag o; Dale N. Litcher, a .v.p ., Bank of N ap erv ille; W ilbur D. M eadow s, pres., Nat'l Bank, Can ton ; Robert J. M itchell, a.c., First N at'l, Lake Forest; W alter J. N ohelty, v.p ., Mount Prospect State; Richard S. P eab ody Sr., pres., First Am erican Bank, A u ro ra; Arthur W. P lass, s.v.p., Elmhurst N at'l; Stephen S. P lebanski, e.v.p ., Thornridge State, South H olland; Robert B. Rew , pres., and C EO , Union N at'l, C hicag o; and Ed w ard L. Sussm an, s.v.p., Bank of Com m erce, Chicago. O K LA H O M A : Robert C. Beard, v.p., First N at'l, B artlesville; W illiam K a a d , pres., First N at'l, M uskogee; and Robert L. M oser, pres., Q u ail Creek Bank, O klahom a City. TEN N ESSEE: T. H. Bishop, v.p., Commerce Un ion Bank, N ashville; Michael Tod Christian, s.v.p ., First N at'l, G reeneville; J. Vincent Ciroli, a .v .p ., and John D. Guthrie, a .v .p ., Union Plant ers N at'l, Mem phis; Fred R. Law son, pres., Blount N at'l, M aryville; and Jam es G . Riggan Jr., v.p.-ln. adm in., First N at'l, Mem phis. TEXAS: George N. Atkinson, e.v.p., Texas Com merce Bank, Lubbock; C h arles R. Batton, e.v.p., First N at'l, Levelland; Robert L. Burns, e.v.p., and J. D. W right, pres., Lakew ood Bank, Dal las; Jerry Buster, pres., T ex as City N at'l; Peter S. C larke, s.v.p., United States N at'l, G a lv e s ton; John M. G o libart, s.v.p., and Charles W . Noble, pres., M etropolitan N at'l, Houston; Thom as A. Linguist, asst. dir.-finance & invest ment, U. S. Sm all Business Adm inistration, Lub bock; M. R. McArthur Jr., v .p .. Peoples N at'l, Tyler; George W. M cClaugherty, v .p ., Broad w a y N at'l, San Antonio; Norm a J. Parker, v.p., First City Bank o f C le ar Lake, Houston; Bookman Peters, pres., City N at'l, B ryan; W il liam Lee Q uillen, s.v.p., State N at'l, O d essa; Robert L. Ruehm an, pres., Ashford Bank, Houston; Robert J. Schneider, v.p., Groos Nat'l, San Antonio; Richard C. Sanders, pres., G u ar anty N at'l, Houston; Jack Vernon Standley, pres., First N at'l, Cleburne; Larry D. W illard, s.v.p., First Nat'l, Big Spring; and W. D. W yatt, pres., First N at'l and First Bancorp., Inc., Corsi can a. Bank Honors Bears KAN SAS: H orace A. Holmes, s.v.p., and Elw ood M arshall, pres.. Home N at'l, Eureka; and John A. M eyer, pres.-ch., Citizens State, El Dorado. KEN TU C KY: Robert L. C ham bless Jr., v.p., Am erican N at'l, Bow ling G reen; O. T. Dorton, pres., Citizens N at'l, Paintsville; Benjam in J. Elkin, 1st v.p., First Security N at'l, Lexington; and Frank D. H ackathorn, e.v.p .. First Hardin N at'l, Elizabethtow n. LO U ISIA N A : Frank R. C la rk , v .p ., and Dudley G. M cElveen, v .p ., Fidelity N at'l, Baton Rouge; J. Leo M cGough, e.v.p., C alcasieu M arine N at'l, Lake C h a rles; and E. Jam es W ethey, s.v.p., Am erican Bank, Baton Rouge. M ISSOURI: W illiam T. Boehm , pres.. Pioneer Bank, St. Louis; Jam es H. Cobb, v.p., and Rod ney R. Hill, pres., Am erican Bank, K a n sa s City; Ernest H arm s, v .p ., Traders N at'l, K a n sa s City; George M arino, 1st v.p., Em pire Bank, Spring https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis NEW M E X IC O : John N. G ilkey, s.v.p.-In. adm in., N ew Mexico Bank, Hobbs; Je rry D. Gum m ere, e.v.p.. Peoples Bank, Bloom ington; W illiam B. Lowry, v.p.-br. mgr., N ew Mexico Bank, Eunice; and Richard W. Moore, pres., C arlsb ad N at'l. IN D IA N A : O tis S. Buckey, e.v.p., Bank o f G e n eva; and Donald B. Smith, pres., C entral N at'l of H ow ard County, Kokomo. M ISSISSIPPI: John G . G iles Jr., ch.-pres., First State, W aynesbo ro; and Robert Y . Hamm ond, pres.. M erchants & Farm ers Bank, Kosciusko. 74 field; Preston H. Pate, e.v.p., First N at'l, Joplin; and Jam es E. Skaggs, s.v.p ., Tower G rove Bank, St. Louis. Allen P. Stults (kneeling), ch. & pres., Am erican N at'l, Chicago, and Chicago Bears founder and ow ner, George H alas Sr., exam ine a portion of Bears m em orabilia that w a s on disp lay at the bank's m ain building this fa ll. The seven-w in dow d isp lay contained artifacts and photos of Chicago Bears and professional football his tory spanning about 56 y ea rs. Said Mr. Stults: "The Chicago Bears w ere one of Am erican N at'I's first customers w hen w e opened our doors for business in the e a rly 1930s. W e've had our ups and dow ns together, but when w e say , 'B ank with the B ears,' w e're still firmly convinced that's the w a y to go!" On a sm aller scale, perhaps banks in suburban or rural a re a s could honor their local high school ath letic team s by featuring d isp lays of their trophies, uniform s, photos, etc. MID-CONTINENT BANKER for December, 1976 H ow to feed a fam ily o f 12 m illion for only $106 m illion a week. more and more industries every day. A n d we’re proving to correspondents that m ore service is the result o f more experience. Understanding business as well as banking has made us a major finan cial strength behind Texas industry. A s the cash registers total up, so does the retailer’s payroll, to the tune o f $3 billion a year for 650,000 employees. But it takes m ore than custom ers’ dollars to T he m ore than 12 m illion build a successful retail business people w h o live in Texas carry in Texas. hom e over $5Vi billion w orth o f It takes solid financial backing. groceries a year. That’s enough A n d First City National Bank is fo o d to place grocery stores second helping merchants find exactly in total retail sales statewide. what they need. This in v olv e A n d if that sounds appetizing, ment has provided us with first consider that Texans spend an hand retail experience.W hat additional $20 billion at * TiC • w e’ve learned is yours 105,000 other retail estab . . for the asking. lishments every year £/■ ' . W e ’re becom ing from cafeterias to involved with camera stores. First City National Bank provides an across-the-counter look at Texas retail businesses. r FIRST CITY N O T IO N A L RANK OF HOUSTON « \ §,■ v :L..JU.4.1 y \ il V T T 1- X m m L L Vi §1 ite r s m M M u : -k P U H ¡P : • \ f]• ••.:' U/ i: >' .jl ■ •• fX Z::: ■ _ /7 • . •• /• - ~ X .X /r JS'vyT !: •// . . • A ,~ c . //I Iri«fc"v1 l:0R V I \ ■: / MID-CONTINENT BANKER for December, 1976 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 75 Early bird a g session got correspondent confer ence of First N at'l, St. Louis, off to good start. Participants w ere (from I.) Neil F. Bergenthal, v.p., host bank; Herbert L. Steinbrueck, pres., Agri Foods; Sam uel D. Addom s, pres., Montfort of Colorado. Bank regulation pan el w a s m oderated by Clarence C. B arksdale (I.), ch. & C EO , host bank. Panelists w ere lam e-duck com m issioners W illiam R. Kostm an, M issouri; Richard K. Lignoul, Illinois. No Economic Jolts Seen W ith Carter, First N at I Conf. Delegates Told By JIM FABIAN Associate Editor p r o s p e r i t y was forecast for the U. S. under the a d m in is t r a t io n of President Jimmy Carter. The prediction was made by Murray L. Weidenbaum, director of the Center for the Study of American Business at Washington University, St. Louis. Dr. Weidenbaum was one of the speakers on the day-long program of the 30th annual Correspondent Confer ence hosted last month by First Na tional in St. Louis. More than 800 bankers and spouses were in attend ance. Dr. Weidenbaum predicted economic growth for 1976 as a whole at about 6 % and an inflation rate averaging about 5%. GNP will rise a total of 11% for the year. In 1977, he said, “ I expect an other 11% increase in the GNP, but with the growth rate and the inflation rate reversed— 5% real growth and 6 % inflation.” He said he could foresee no boom areas in the coming 12 months. Capital spending will lead the way out of the current lull, rising about 10% in real terms. This expansion, he said, will be accompanied by a recovery in housing, especially the construction of single family units, and a rise in business in ventory accumulation. Consumer spending will grow at about the same rate as the economy as a whole, he continued, reflecting both a large expansion in personal incomes and an offsetting erosion from inflation. He predicted a deficit o f about $50 M oderate 76 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis billion in the federal budget for fiscal year 1977. That will be down from 1976’s $65.6 billion, he added. Dr. W eidenbaum is an economic consultant for First National. Frank K. Spinner, senior vice presi dent, host bank, pegged interest rates for 1977 at 7% for fed funds, 8 % for the prime, 6 /2% for one-year govern ments and 7/1% for seven-year govern ments. He said the GNP would be between 5% and 6 % next year and the stock market will hit 1,200 sometime in 1977 and then decline. He said the key to the 1977 economy will be the policy of the Federal Re serve and added that he thought Chair man Arthur Burns would cooperate with President Carter. Congress, he added, will continue spending and loan de mand will determine interest rates and the inflation rate. He also predicted that a strong eco nomic expansion would lead to a crunch in 1978-79. A poll of bankers attending the Investm ent panel featured (from I.) Donald H. Ludw ig, v.p.; Frank K. Spinner, s.v.p.; John W . Rowe, v.p ., a ll of host bank. Mr. Rowe has since joined Am erican N at'l, Chicago. Taking part in business outlook panel at confer ence w ere (from I.) David Culver, v.p., host bank; Eugene A. Leonard, 1st v.p., St. Louis Fed; M urray L. W eidenbaum , economic con sultant, host bank. conference revealed that they see the prime rate at between 7% and 8 % next year. They projected fed funds at 6%, unemployment at about 7% and the D ow Jones industrial average reaching 1,000 sometime next year. Principal speaker at the conference was Lawrence K. Roos, president, St. Louis Fed, and former officer of First National. He stressed the fact that an inde pendent Fed is the key to fighting in flation. He said that, if the system “ is forced by the White House or by Congress to monetize the debt in order to keep interest rates from rising, in flation is certain to follow .” There are individuals, he said, who “ sincerely believe that the best means of assuring full employment and eco nomic prosperity is through deficit spending and easy money. They feel that inflation is a small price to pay for immediate and short-lived prosperity.” It is essential, however, he said, that these views be resisted “ and hopefully overcome.” He called on all Americans “ to stand up against efforts to politicize the Fed,” and said it is fortunate that a series of bills introduced during the last session of Congress that would have placed the Fed under control of the executive and legislative branches of government were not enacted. He ex pects similar legislative moves in the new Congress. During the bank management panel, bankers were told to expect the new generation of consumers to demand more consumer services but with less personal contact. Surveys show that some 35% of this new generation will accept ATMs. The speaker, Kalman A. Lifson, man aging principal at Lifson, Wilson, Ferguson & Winich, Dallas, said bank planners should consider the volatility of rates to the customer and the fact that competition will becom e more strenuous as more and more banks go MID-CONTINENT BANKER for December, 1976 Must Reading for Every Director and Officer! These Three Board-Related Books (Including Revised Edition of Conflicts of Interest) Conflicts of Interest $ 6 .2 5 Responsibilities of Bank Directors $ 4 .9 5 Composition and Compensation of Bank Boards $ 4 .2 5 (1) CONFLICTS OF INTEREST FOR DIRECTORS A N D OFFICERS OF FIN A N C IAL IN STITUTIONS $6,25 . . . The new, revised edition includes everything directors and officers should know about the topic: Presents the problem of “ conflicts,” gives examiners’ views o f directors’ business relationships with the bank, examines ethical pitfalls involving conflicts, conflicts in trust de partments, details positive actions for reducing potential for conflicts. Other important data are the Comptroller’s ruling on statements of business interest of directors and principal officers of national banks and sample conflict of interest policies in use today that can be adapted by your board. N ew material includes FD IC regulation on insider transactions. Q U A N TITY PRICES 2-5 $5.50 e a. 11-25 $5.00 ea. 6-10 $5.25 e a. over 25 $4.75 ea. what is expected of them and the bank they serve in terms of responsibilities to depositors, shareholders and the pub lic. Responsibilities examines recent court decisions, investment return, con tinuity of management, long-range planning, effects o f structural changes — HCs, branching, mergers— on com petition, and more. Q U A N TITY PRICES 2-5 $4.50 eo. 11-25 $4.20 e a. 6-10 $4.35 ea. over 25 $4.10 ea. author, Dr. Lewis E. Davids, editor of The BANK BOARD Letter. This book will give the reader an insight into the variety o f occupations represented on bank boards; the number o f inside and outside directors; frequencies of meet ings; salaries paid. Also included are many tables, showing retirement ages for directors, per-meeting and annual fees, highest paid directors, etc. D e signed to help you make comparisons and put your board structure and fees in proper perspective. (3) COM POSITION A N D COM PEN SATION OF BANK BOARDS $4.25 . . . A statistical analysis of bank boards based on comprehensive surveys by the Q U A N TITY PRICES 2-5 $3.85 e a. 11-25 $3.35 e a . 6-10 $3.60 ea. over 25 $3.10 ea. THE BANK BOARD LETTER 408 Olive St., St. Louis, Mo. 63102 Send These Books: ............................. copies, Conflicts of Interest $ ............................. copies, Responsibilities of Bank Directors $ (2) RESPONSIBILITIES OF BANK D IRECTORS $4.95 . . . Written by Raymond Van Houtte, president & CEO of Tompkins County (New York) Trust Co., this book is “ right” for to day’s problems. Due to the economic influence banks have on their commu nities, the rapid growth o f holding companies and the ever-growing “ con sumer” movement, directors must know ............................. copies, Composition & Compensation Total enclosed Name ...................................................................... Title ........... Bank ................................................................................................ Street .............................................................................................. City, State, Z i p .............................................................................. (Please send check with order. In Missouri, add 4%% tax.) MID-CONTINENT BANKER for December, 1976 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis $ $ 77 P re se n tin g (V * me n a w n er INSURANCE ïïiïd BANKERS A Sensible Risk Management Program In One Step- By-Step Practical Desk Top Reference Guide Now every commercial banker can understand, plan and monitor a sensible program of Risk Management. This new, concise manual helps you measure all the loss exposures you face...shows how to reduce needless and costly insurance gaps or overlaps...aids you in establishing a full-dimensional risk manage ment program, including loss funding, to conserve your bank assets and get more for your insurance and protection dollar. This unique manual - (which is by the same publisher o f the Risk and Insurance Manage ment Guide For Savings Institutions) - takes you step-by-step through every area of Risk Management planning - in simple terms, with specific examples. You needn’t be an insur ance agent to understand it. Yet every section reveals new, proven ways to reduce your risks, losses and problems and is constantly kept up to date. THE RISK AND INSURANCE MANAGEMENT GUIDE •Complete Loose-Leaf, Tab-Divided, Section Indexed •Ten issues of “ Risk Management News" •Guide Updates For The First Year * 1 0 0 .° ° HOW YOUR GUIDE STAYS UP-TO-DATE You will be automatically billed $50.00 annually for continuing service beyond the first year to keep your guide current. 10-DAY TRIAL OFFER Take 10 days to examine this vital manual at your leisure. If you are not satisfied, simply return the guide at no cost or obligation. * <P M id -C o n tin en t Banker 408 O liv e St. S t. L o u is, Mo. 63102 Please send me The Risk and Insurance Management Guide for Bankers. The $100.00 initial price includes the first ten issues of “ Risk Management News" plus all revisions and additions to the Guide. I understand if I am not completely satisfied I may return the Guide within ten days and my money will be refunded. Please include appropriate sales tax. □ Check enclosed, please ship postage paid. □ Bill me and add $2.50 to cover postage and handling. □ Please send me further information. Name.. Title..................................... Institution........................... Street.................................... City............................State.. 78 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis ..Zip.. out seeking retail customers. He said bankers should be prepared to change their prices and to make an effort to find out where their deposits are com ing from. He said bankers should be prepared to determine what the trends have been, see if the trends can be changed if they are unfavorable and use expense control and balance-sheet planning in their projections. Law rence K. Roos, pres., St. Louis Fed, fields questions at press conference held in conjunction w ith correspondent confer ence. John W . Rowe, vice president, host bank, told those attending the invest ment panel that municipals have been good investments in the past year, due to their volume and the N ew York City situation. He also said the New York City problem is far from over. He advised holding N ew York City securities be cause the market for them is depressed. There is a possibility that President Carter will give federal aid to New York City, but, meanwhile, there is no place in a bank’s portfolio for New York City municipals, he said. David Culver, vice president and head of the correspondent department of First National, commented on the bank’s recently introduced community assistance program. He said it can be an important medium for a community to obtain federal grants and loans for which it is eligible, but for which eligi bility is difficult to determine because of the complicated procedures necessary to unsnarl government regulations. “ While First National does not en dorse massive federal spending pro grams, ’ he said, “we do, however, feel that many communities in Missouri and southern Illinois have not had the time, funds availability, staffing or technical expertise to seek out needed federal assistance programs to help improve the community’s social environment, not to mention the stimulation of their econo mies. The community assistance pro gram can be a cost-effective way to achieve this.” Paul M. Ross, senior vice president, host bank, spoke on the role o f di rectors. He told bankers that they could expect their directors to be a key part of the bank’s planning and policy making process, that bankers can give their directors the kind of information about bank operations that will let them advise management intelligently, that directors should be educated about banking and that directors should be assured that their interests are pro tected from legal problems and that the bank is complying with all ap propriate rules and regulations. He said a bank’s directors can be a source of marketing help, once they know the bank’s marketing goals. Even though the role of directors is not to run the bank, directors can give man agement thoughtful and independent advice on bank management topics. The jobs o f both officers and directors are getting tougher, he said, due to new technology, increased competition and new rules and regulations. Bankers were urged to make directors key parts of the management team. The conference concluded with din ner and entertainment, hosted by Clarence C. Barksdale, chairman and CEO. • • Growth Certificates' : New Service From BofA Aids Customers' Planning Bank of America, San Francisco, has announced Growth Certificates, which are designed to take the guesswork out o f savings. They help customers plan their financial futures through achieve ment of specific savings goals over var ious time periods. A Growth Certificate is a CD issued with a stated maturity value— purchase price plus interest compounded daily. They are available with maturity values of from $ 1,000 to $20,000 and with terms to maturity of one, 2 /2, four and six years. Interest rates range from 6% annually on one-year CDs to 7.5% an nually on six-year certificates. A bank spokesman says customers are encouraged to use the CDs for spe- Bank of A m erica, San Francisco, has intro duced Grow th Certificates, w hich a re designed to help custom ers plan financial futures through achievem ent of specific savings go als over vario us time periods. G row th Certificates are a v a ila b le in variety of m aturity v alues, terms to m aturity and interest rates. MID-CONTINENT BANKER for December, 1976 cific goals, such as an education, re tirement nest egg, vacation or a down payment. Customers will know in ad vance, he adds, how much money to invest and for how long to reach a de sired savings goal. As an example, a customer needing $5,000 in six years can purchase a Growth Certificate now for $3,188.29 earning an annual interest rate of 7.5%. The nonnegotiable Growth Certifi cates, the spokesman says, can be used as collateral for loans and can be re deemed at maturity at any Bank of America branch. its the museum in search of help in identifying coins and obtaining answers to inquiries about appraisals, new-coin offerings and general information. Questions such as “ Whose picture is on the $ 10,000 bill?” are common, a bank spokesman says. « Exhibits inform the public. A gold display, for example, provides in formation about what to look for when buying gold; an inflation exhibit dem onstrates that problem’s commonness throughout history; and one on coin collecting offers hints about how and what to collect. Although the museum is a perma- nent feature, the displays change from time to time. One exhibit of a few years ago that was— in the words of bank officials— “ tremendously success ful in terms of publicity and good will” featured the coins of Poland. What is in the future for N B D ’s money museum? A new home in D e troit’s Renaissance Center. Then, offi cials say, the exhibit will have more space, expanded hours and a “ highly visible” position. Where Else? Bank's Money Museum !s 16-year-Old Tradition W here else but in a bank would one expect to find a museum devoted to money? The natural association of money and banking have combined to make National Bank of Detroit’s money museum a long-lived public relations tool. Let our billion dollar organization help your bank profit. Call Lynn Mosley (205/832-8588), president of First Alabama Bancshares, Inc. This is 16-year-old m oney museum of N a t i Bank of Detroit. Officials say exhibit has sur passed its original go als of inform ing public, attracting potential custom ers to bank and generating publicity: Last y ea r 12,000 people visited museum! W hen the museum first opened 16 years ago, its objectives were threefold: inform the public about old coins and currency, attract potential customers to the bank and generate publicity. And the money museum still fulfills those goals, bank officials state, because last year nearly 12,000 people visited the museum either as part o f a tour or in walk-in groups. Located on the mezzanine of N B D ’s Main Office, the display was begun through the loan of a numismatic col lection of a bank director. In 1969, the bank began to acquire the collection and to add to it. At present, the mu seum boasts more than 15,000 items— coins, currency, medals, tokens and primitive forms of money. Affiliate Banks First Alabama First Alabama First Alabama First Alabama First Alabama First Alabama First Alabama First Alabama First Alabama First Alabama First Alabama First Alabama First Alabama Bank of M ontgom ery, N. A. Bank of Birmingham Bank of Huntsville, N.A. Bank of Tuscaloosa, N.A. Bank of Dothan Bank of Selma, N.A. Bank of Gadsden, N.A. Bank of Athens, N.A. Bank of Baldwin County, N.A. Bank of G untersville Bank of Hartselle Bank of Phenix City, N.A. Bank of M obile County R rsy U a b a m a The display has produced side bene fits for the bank: • The public writes, phones or vis MID-CONTINENT BANKER for December, 1976 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 79 S o rt a nd M ailing M a ch in e fo r B ra n c h O ffic e s ^ B a n k S ta te m e n t M ailin g M a ch in e s 1 1 1 D e sk ■ ■ * * » I « * I I I I t » * t I . M a ilin g M a ch in e s T a p e O n ly i t * * » * t » t * *____ D e p a rtm e n ta l S o rtin g M ail O p e n in g B a n k D e p a rtm e n ts by C a r r ie r S e q u e n c e P rim a ry S o rt A re a O u tg o in g M ail In c o m in g M ail In te r- O flic e M ail Layout of m ail room at Birm ingham (A ia.) Trust Nat'l w a s planned in collaboration w ith PitneyBow es, office equipm ent m anufacturer. Professional Layout for M ailing Room Boosts Efficiency, Cuts Costs for Bank ANK M AIL ROOM S need improv ing whenever increased volume— or a change in bank procedures— cuts into their efficiency and operating cost, according to Pitney-Bowes, office equip ment manufacturer. Recognizing when this critical point occurs is not easy for a busy bank ex ecutive, but there are ways of getting help from mail room experts. A longrange step is to join the nearest Postal Customer Council, composed of mail ers and postal officials jointly concerned with improving postal communications. A quicker way is to take advantage of the free counseling service offered by some office equipment manufacturers. Pitney-Bowes’ representatives use a "fact finder” survey to analyze mail handling and internal paper-flow pro cedures. Their analysis is based on ma terial offered in the company’s two-day postal education seminars, conducted periodically in selected cities. B The survey will produce suggestions for practices and procedures that could save time, labor, space, materials or money, not just in the mailing opera tion, but in statement processing, and the collating, copying, counting, fold ing and inserting of other bank forms. Pitney-Bowes also offers free assist ance with mail room designing and im provement. After consultation with op erations officials, mail room supervisors and even the architect or designer, the company’s representative offers a floor plan that he or she believes will create the best possible mail flow in the space available. This type of assistance helps lighten the burden of higher postal and mail handling costs. The mail room at Birmingham (Ala.) Trust National is an example of so phisticated mailing procedures and a layout designed in cooperation with a Pitney-Bowes representative. David M cLeod, mail room manager, has received more money-saving sug gestion awards in the last few years than anyone in the bank. “ That’s be cause there are lots of ways to econ omize in the mail room,” he says. “ After visiting mail rooms in Dallas, New Or leans and Washington, D. C., and at tending many postal forums, I know that good mail handling practices can help bankers save.” The BTNB mail room is not new, but it has recently been upgraded, or “ fine tuned,” as Mr. M cLeod describes it. He availed himself of the free planning services described earlier in this article and has added many innovations of his own. The 14-person stall' is knowledge able and productive. Better than 95% o f all outgoing mail is at its destination within one day; the morning’s first in coming mail is distributed by 7 a.m. Mr. M cL eod’s first task was to plan what equipment he needed and where that equipment should be located to establish the most efficient mail-flow system. Modular mail room furniture was selected because it allowed Mr. M cL eod to arrange and rearrange his mail room as he thought necessary. Calling this his “ erector set” concept, Mr. M cLeod arranged the modules in a variety o f configurations which per mitted efficient use of automatic equip ment and eliminated unnecessary steps in handling the mail. Out-going mail travels along a U-shaped arrangement of consoles for processing. At one console, large en velopes and packages are sealed. The next section has variable-sized bins into which mail is sorted by department be fore it is put through a postage-meter ing machine. This enables each depart ment to be charged for the exact post age it uses. A third section has a shelf at eye-level, with a 20 -ounce scale on the left and a 10 -pound scale on the right; a postage meter mailing machine stands on the console, beneath the scales. Sort-bin modules for separating firstand third-class mail permit an employee to run a large group of one-ounce let ters, for example, through the postage 24 Hour Toll Free Telephone Service Weekly Confidential Market Report Marketing Seminars conducted for Clients in Your Area W R IT E O R C A L L FGL. 1200 35th S t West Des Moines. Iowa 50265 515 223-2200 80 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis MID-CONTINENT BANKER for December, 1976 “With the First as a partner, we’ve succeeded as we’ve helped Jim Boone’s farm implement business succeed.” The First National Bank o f Quinter, Kansas is a true success story. A correspondent . bank relationship has helped it P-jr. develop and grow with an important new customer. In 1965', Robert Bjtigbee, president q i the bank, called * „ upon th£ First National Bank o f Kàhsas Ç ity to participate in a . . major line o f credit for Mr. Jim Béojrie, founder o f Ideal -Industries in Quinter, manufacturer and distributor o f specialized farm equipment. The First National Bank o f Kansas City extended credit used for seasonal working capital and in recent years for major business expansion and ~ distribution o f Jim B oone’s own invention* the Flex-King stubble mulch plow. Credit assistance and the itional help o f business rtise o f The people in our espondept Department like e Dudley have been t in the success o f First al Bank o f Quinter. ’* Aml-as Jim B oone’ s small husband-'and-wife, company has expanded to a thriving "corporation, First National Back o f Quinter has grown with important new business. Ij. ’ C&ll the professional staff o f the Correspondent Department o f the First National Bank o f Kansas City. We can. help your ' ' ’ ‘ ‘ with the development of cHiew bt^iness. ' . ^ K 0 q r correspondent tradition haSbeen built on helping banks like'the’S irst National of inter. ^ v - Why not put bur strong ' tradition o f excellence to work ‘ your success. Yxir success is our tradition. First . National Barue rof KANSAS CITY. .M ISSOURI An Affiliate of First National Charter Corporation MID-CONTINENT BANKER for December, 1976 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Member FDIC meter. Metering in such groups, rather than constantly changing postage meter settings for a few letters, saves con siderable time. So does having the two scales located directly above the mail ing machine, which makes for a “ stand ing-in-place” operation, according to Mr. M cLeod, In another area, a mail weigh ma chine and a postage meter mailing ma chine are almost on-line, so that one clerk can accurately weigh statement envelopes and sort, meter and tray them at 2,500 an hour. Another self-contained furniture unit has sort bins, scales and a mailing ma chine used to process branch office mail and to serve as a back-up for large mailings. Quite often, all three mailing machines are in use at the same time. For company and correspondentbank statements, the bank has a special mailing console with bins and a tapeonly postage meter machine. A 20ounce and a 10 -pound scale are on the console, with a 500-pound platform scale nearby for weighing sacks and bundles. Tw o clerks can weigh, meterstamp and tray or sack the mail about three times faster than before the mail room redesign, Mr. M cLeod says. Incoming mail is separated into sort bins. Mail not clearly addressed is sep arated in the primary sort and then opened on three sides with an electric letter opener. Sort bins are color-coded for each of the seven floors of the build ing, and by individual name, depart ment, or branch office. These bins are set up in carrier-stop sequence. Mr. M cLeod says, “ Mail is the prin cipal link between the bank and its cus tomers. Few people realize that having valuable bank securities passing through our mail room requires careful handling of all mail! Also, good mail service in our check-collection process means added profit from available funds. W e find that trained personnel, proper equipment, a good work flow and pleas ant surroundings help our mail move internally and through the postal ser vice faster and more economically. W e know that better mail service begins with the mailer.” * * Odyssey 300': The Latest Indoor Sport Is Premium From Bank A savings promotion has brought the latest in indoor sports to many custo mers of First National, Chicago. Any one depositing $250 was able to pur chase a Magnavox Odyssey 300 video action game. HELP IS ON THE LINE ( 1- 313 - 2 2 2 - 3941 ) TALK TO A DETROIT BANK-er Your d ire ct line to personal answers to your corre spondent banking problem s Call a n ytim e and g e t to know a D e t r o it BANK-er better. you ought to know a DETROIT BANK-er ^ 3 3 2 2 ? D E T R O IT BANK & TRUST MEMBER 82 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis F DIC Sold for $39.95 to qualifying deposi tors, the video game fits any television and offers electronic versions of tennis, hockey and handball. And players are able to compete in each game on three different skill levels. Publicizing the event were news paper ads featuring Chicago Black Hawks goalie Tony Esposito. Head lined, “ Nice Save, Tony,” the ads in cluded coupons for mailing in premium orders and deposits. Displays demon strating Odyssey 300 were placed on First National’s first floor. Customers were given the option of picking up the video game at the bank’s sales center or of requesting delivery service for a $2 charge. Financing Needs of Collegians Met With BofA Programs SAN FRANCISCO— Bank of Amer ica has offered a series of special bank ing services designed to meet the fi nancing needs of college students. The College Plan checking account is available to college, university and vocational-school students and offers unlimited check writing with no min imum balance. It features a $1 monthly service charge— free during the summer or any month in which a minimum balance of $300 is maintained, and the account stays open during the sum mer even with zero balance. Also avail able are special, low-cost personalized checks. Students of sophomore standing or higher may qualify for a Student BankAmericard, which permits them— through use of a tuition check— to charge tuition and entrance fees at most colleges and universities in California. Other services aimed specifically at meeting students’ special needs are overdraft protection to those who qual ify, money and account transfer service, personal loans for educational purposes and federally insured student loans. • Brandt, Inc. This Watertown, Wis.based firm has announced two new ap pointments. James A. Wilgus has been made southern marketing manager and supervises nine Brandt districts in the southern states as well as specific products categories. He has a back ground in the administrative, sales and advertising/publishing fields. Jon R. Engelbrecht has been made vice presi dent, Brandt Manufacturing Co., Pell City, Ala. This is a wholly owned sub sidiary of Brandt, Inc. Mr. Engelbrecht is responsible for overall supervision of the Pell City operation and continues as general manager of Brandt Manu facturing. He joined Brandt, Inc., in 1956. MID-CONTINENT BANKER for December, 1976 You save tim e and money and are assured of accurate transfer of loan information. You Save Time By sending us the loan information via your computer tape you save the time that would be required to complete the n ecessary forms. I w ant to save tim e and m oney. Send me more information on your installment loan paym ent system. Name . You Save Money Bank Name B eca u se we save time in preparing the time payment books by using your computer tape, we are able to pass special savings on to you. Address____ C ity_________ State. Zip --------- You are Assured of Accurate Transfer of Information B e ca u se we take the information directly from your computer tape the possibility of human error in encoding and decoding the loan information is eliminated. G ive us the opportunity to tell you m ore about our com plete installment loan paym ent system . W e ’re second to none in quality and price. MID-CONTINENT BANKER for December, 1976 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Kansas Bank Note Company FIFTH & JEFFERSON STREETS • FREDONIA. KANSAS 66736 • 316-378-2146 For your total bank printing needs F ro m t h e M id - C o n t in e n t A r e a Alabama ■ THOMAS W . LEAVELL has joined First National, Mobile, as an assistant vice president and trust investment officer in the investment division. He began his banking career in 1973. • W . GARY SUTTLE has joined Ala bama Bancorp., Birmingham, as senior vice president with responsibilities in finance and planning, accounting and control, systems and administration and operations support. He was formerly with Vulcan Materials Co. The HC has announced that an agreement has been reached to affiliate Farmers & Merchants, Ashford, with Alabama Ban corp. F&M will be the 15th affiliate of the HC. Arkansas ■ C O M M E RC IAL N ATION AL, Little Rock, has named Kirk Dixon and Gary Tarpley assistant vice presidents in commercial loans. Everett Tucker III has been named agribusiness liaison officer. They joined the bank in 1969, 1975 and 1976, respectively. bank building recently. More than 6,000 people attended the Saturday afternoon event. The bank has grown from $1 million in deposits when it was chartered two years ago to its present $10 million. Illinois ■ W IL L IA M F. M ITCH ELL, vice president, First Arkansas Bankstock Corp., Little Rock, has been given new responsibilities. He will direct the hu man resources function of the HC with specific responsibilities for organization planning and manpower development. He will be senior personnel officer. ■ W IL L IA M O. KURTZ retired November 1 as president, Metropolitan Bank, Chicago. He has spent 41 years in banking, most of it with American National, Chicago, where he served in the correspondent banking department. He is a former president of the Illinois Bankers Association. ■ CITIZENS STATE, Nashville, held a grand opening celebration at its new KURTZ SEAMAN ■ IRVING SEAMAN JR. has been elected vice chairman, Sears Bank, Chi cago. He was formerly CEO and chair man of the executive committee, Na tional Boulevard Bank, Chicago. He is a former chairman, Chicago Clearing House Association and treasurer, As sociation of Reserve City Bankers. From 1947 to 1961, he was with Continental Illinois National, Chicago. Im a g in a tio n n Correspondent Banking. A t Union Bank in M ontgom ery, Don Lamon and his associates have brought imagination and innovation to Corre spondent Banking, while maintaining the friendly personal service that Union Bank has been noted for since 1901. Alabama's Largest Independent Bank. 84 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis / * 2976 * U NIONBaNK & T R U S T CO. MEMBER F.D.I.C. 60 COMMERCE STREET MONTGOMERY, ALABAMA 36104 HARROW SMITH COMPANY Union N ational Bank Bldg. 501/374-7555 Little Rock, A rk a n sa s J. E. W OMELDORFF, Executive Vice President MID-CONTINENT BANKER for December, 1976 ■ FIRST SECURITY BANK of Fox Valley, Aurora, began doing business late in October in 4,500-square-foot quarters on the second level of Fox Valley Center, a regional shopping center. President is G. Ward Stearns. ■ GLENN E. A U TEN RIETH has joined First National, Batavia, as vice president and trust officer and senior officer in charge of the loan depart ment. ■ FIRST N ATION AL, Pekin, dedi cated Its new home recently. The bank, located on a square block bounded by Sixth, Fifth, Margaret and Ann Eliza streets, features curtain-wall construc tion with bronze fascia. A striking feature is four cylindrical towers. Eight drive-under teller lanes run beneath the building. The bank occupies the lower level, ground level and first floor. A second floor is reserved for bank ex pansion and tenant rental. SIN Q U EFIEID GLASS ■ AM ERICAN NATION AL, Chicago, has elected Dennis F. Glass senior vice president and Rex A. Sinquefield, vice president, head of the trust depart ment’s investment group and chairman, trust investment committee. Mr. Glass, who joined the bank in 1958, is senior portfolio manager in the trust depart ment. Mr. Sinquefield has been with the bank since 1972. ■ FREDERICK C. MEYERS has been elected assistant to the chairman, Central National Chicago Corp. and Central National Bank. He joined the organization in 1966 and has been a vice president since 1972. He is in charge o f corporate long-range planning and business development and is in volved in corporate and public re lations activities. ■ STATE NATION AL, Lincoln, has promoted Ted Awe and Vernon A. Phillips from loan officers to assistant vice presidents and Harold A. Ramlow from assistant loan officer to loan of ficer. ■ BANK OF LANSING has opened a new drive-up walk-up facility at 186th Street and Torrence Avenue. A c cording to the bank, the facility is the first in the entire state to be opened by a state bank under the new facility law which permits facilities to be opened within 3,500 yards of the main bank. TOP: N ew building of First N atio nal, Pekin, occupies block-square site. MIDDLE: Taking part in bank's dedication w a s Steve Ford (c.), son of President G erald Ford. Mr. Ford is flanked by C h a rles G ag n ier (I.), bank pres, and WalEy G ag n ier, brother of C harles. Behind three som e is bronze bust of late Sen. Everett M. Dirksen, Pekin resident. BOTTOM: Kiddie lift in bank's m ain lobby puts youngsters face-toface w ith tellers. ■ ANDERSON STATE, Oneida, cele brated its centennial with an open house recently. More than 1,200 area residents attended. Assets of the bank have grown from $337,000 in 1917 to more than $16 million. The institution was originally known as Oneida Ex change Bank. MID-CONTINENT BANKER for December, 1976 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis ■ RAYM ON D C. B U R R O U G H S , president and CEO, City National, Murphysboro, has been reelected a Class A director of the St. Louis Fed for a three-year term beginning Janu ary 1. He had been a Fed director since 1974. Indiana ■ HUBERT NEFF has been named president of First National, Aurora, suc ceeding Earl Green, who has retired as president, but who remains a director. Mr. Neff has been CEO since January. Mrs. Esther Roache has retired as di rector and has been named a director emeritus. ■ LOUIS ANTHONY (T O N Y ) DeV AU LT has been named assistant man ager, Shelby ville Office, Fairland Na tional. He had been with Chrysler Credit Corp., where he was credit man ager-operations supervisor, Des Moines, la., office. ■ THOM AS E. ELYEA and Philip A. Carraro have been named vice presi dents in the commercial banking ser vices department at Continental Illi nois National, Chicago. Mr. Elyea, who joined the bank in 1969, calls on cor respondent banks in Indiana. Mr. Car raro, who has been with Continental since 1969, calls on corporate customers in Indiana and Illinois. ■ D A V ID L. BIDD ING ER, vice pres ident, has been named to head the Indiana Division of the U. S. banking group at American Fletcher National, Indianapolis. Succeeding Mr. Biddinger as head of the national accounts divi sion is Richard R. Phillips, vice presi dent. Mr. Biddinger joined the bank in 1970; Mr. Phillips in 1958. ELYEA BIDDIN GER 85 ■ CHARLES R. PHILLIPS and John A. Nelson have been promoted to vice president and assistant vice president, respectively, at St. Joseph Valley Bank, Elkhart. Mr. Phillips joined the bank in 1970, Mr. Nelson in 1972. ■ FIRST BANK, South Bend, has opened its Granger Office at Indiana 23 and Bittersweet Road. The ribbon used during the opening ceremonies was of 50 two-dollar bills and was d o nated to a local elementary school. During opening day, visitors received free gifts and were offered a free ride in a helicopter; visitors also could reg ister for a number of prizes. ■ FOURTH N ATION AL, Wichita, has announced personnel realignments involving Patrick C. W oodward, Thomas B. Baggett and Dennis E. Garton. Mr. W oodward, assistant vice president, has been named officer in charge of pen sion trust management; Mr. Baggett is manager of trust operations and has been named trust operations officer; Mr. Garton has been named loan ser vices manager. They joined the bank in 1963, 1969 and 1973, respectively. ■ M ELVIN L. LINDSEY has been appointed sales engineer for east-cen tral Kansas by LeFebure Corp., Cedar Rapids, la. He is headquartered in the firm’s Kansas City branch. ■ W IL L IA M R. SHAVER has been made controller at Security National, Kansas City. A banker nearly 20 years, Mr. Shaver started as a part-time work er in Louisville. He has specialized in bank accounting, operations, manage ment and data processing and, most recently, has been controller of a large bank in the Southeast. When M id-C on tinent Banker reported Mr. Shaver’s appointment in its November issue, the editors inadvertently moved Security National to Wichita. W e regret the error. Pictured at centenniol/bicentenniol celebration of First N at'l, W ichita, a re (I. to r.): Don Hoff m an, s.v.p., host bank; W illiam S. M ay, pres., Federal Land Bank, W ichita; Dr. Paul S. N adler, professor of business adm inistration, Rutgers U niv.; and C. Q. C hand ler, ch. & pres.. First Nat'l. Mr. M ay and Dr. N adler spoke at eco nomic forum that w a s part of celebration. Estate.” Dr. Nadler is professor of busi ness administration, Rutgers University, New Brunswick, N. J., and Mr. May is president, Federal Land Bank, Wichita. First National started in 1876 as Farmer’s & Merchant’s Bank after an other First National (no connection with the present bank) had failed. In 1882, the bank was reorganized and re named Kansas National after receiving a national charter. Two mergers fol lowed, the second one— in 1919— re sulting in the present First National. ■ STEPHEN R. “ RICK” D ILL has been named correspondent officer in Merchants National of Topeka’s agri culture-correspondent bank department. Mr. Dill, a native of Olathe, was as sociated with his father in a livestock and grain operation while attending Kansas State University. He received a degree in agricultural economics and a minor in business administration. He joined the bank in April, 1975, as ad ministrative assistant in the agriculturecorrespondent bank department. BAI Week in Kansas Inform al discussion is held during First N at'l in W ichita's centennial/bicentennial ob servance by: Mrs. Ralph Hight; Mr. Hight (I.), v.p., host bank; Harold Eagleton (facing cam era), v.p., First N at'l, Salin a, K an .; and Robert Show alter (w earing plaid coat), pres., Hesston (Kan.) State. Centennial/Bicentennial Party Held by First Nat'l, Wichita, For 6 5 0 Correspondent Bankers W IC H IT A — First National enter tained about 650 correspondent cus tomers and other guests October 30 at a celebration of the bank’s centennial and the nation’s bicentennial. The day-long festivities included a luncheon, eco nomic forum, a reception, dinner and entertainment. Special entertainment was arranged during the day for women guests. Econom ic forum speakers were Dr. Paul H. Nadler, whose topic was, “ The Outlook for Business and Banking” ; and William S. May, who discussed “ Cross roads in the Ownership of Farm Real K an sas G overnor Robert F. Bennett signed proclam ation designating w eek of Novem ber 14 a s Bank Adm inistration Institute (BAI) Week in K an sas. W itnessing cerem ony w ere (from I.) H ow ard A. Theimer, auditor, Fourth Nat'l, W ichita; and pres., BAI W ichita C hapter; Dale A. Bradley, e.v.p., Citizens State, M iltonvale, and BAI district dir.; Fred W. Beckmeyer, v.p.. First Nat'l, Salin a, and BAI state dir.; R. R. Smith, cash., Peoples N at'l, C la y Center, and v.p., BAI C entral K an sas C hapter; Ray L. Miller, a.c.. M erchants N at'l, Topeka, and pres., BAI Sunflower C hapter; Joseph P. Kennedy, v.p.. First Nat'l, Frankfort, and pres., BAI K an sas Flint Hills C hapter, M an hattan; and Larry G ra h am , v.p., First N at'l, Topeka, and v.p.. Sunflower Chapter. C O M M E R C IA L NATIONA L B A N K 6th & Minnesota Ave. 913 371-003 5 K an sas City, K ansas 66101 P R O F E S S IO N A L C O R R E S P O N D E N T T R U S T S E R V IC E 86 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis MID-CONTINENT BANKER for December, 1976 Kentucky Mississippi ■ CITIZENS FIDELITY, Louisville, has promoted John McClure from vice president, branch administration, to vice president and manager, branch admin istration; Walter Frandsen to assistant vice president; James T. Hamilton to operations officers; Thomas Albright and Martha Handy to assistant cashiers; and Michael I. Leet to personnel offi cer. As reported last month, Jerry L. Skidmore has been named an assistant vice president in the correspondent banking division. Robert S. Yoder, pres ident and CEO, Capital Holding Co., has been elected a director of Citizens Fidelity Corp., HC for the bank. ■ JOHN D. GIBBONS and Parham W. Williams have been promoted to senior vice presidents by Deposit Guar anty National, Jackson. Mr. Gibbons first joined the bank in 1952 and re joined it earlier this year. Mr. Williams joined the bank in 1961 and has been a vice president since earlier this year. He is now manager of Monticello Bank, a branch of DGNB. ■ LARRY J. BARIN has been ap pointed chairman and CEO at Bank of St. John, Reserve. Harold M. Keller has been appointed president. Mr. Babin has been in banking since 1942 and was formerly with American Bank, Norco, as executive vice president while serving as a director of Bank of St. John. Mr. Keller succeeds Thomas W. Smith Jr., who had been president since 1968. Mr. Keller joined the bank in 1968 and was formerly senior vice pres ident. ■ C O N TIN EN TA L BANK, Harvey, has appointed Harold C. Boutte as senior vice chairman and H. Brooks McElveen as president. Mr. Boutte joined the bank in 1973; Mr. McElveen was formerly president, Bank of Com merce, Shreveport. Also appointed were Jerry Holloway and William E. DeBlanc, to vice presidents. ■ L. D A V ID KELLO GG JR. has been elected to the board of Guaranty Bank, Alexandria, succeeding his father, the late L. D. Kellogg, who had been a di rector since 1960. Mr. Kellogg is presi dent, L. D. Kellogg Lumber Co. W ILLIAM S ■ KENNETH PASVANTIS has been promoted to vice president at First Na tional, Jackson. He is manager of the Medical Arts Office. Named assistant vice presidents were Robert L. M oody and Craig Robinson. Named assistant cashiers were Irene Perkins, Robert Gaston, Wayne Newell, George Aycock, Newton Blount and Joseph Hegwood. John F. Davis was named as sistant trust officer and William Gullett was promoted to assistant auditor. ■ FIRST NATION AL, St. Louis, has elected Richard Alan Murray a vice president and John A. Rothschild Jr., Robert A. Hummert and Thiers Y. An derson assistant vice presidents. Mr. Murray, who joined the bank in 1972, is in charge of the London Office. Mr. Rothschild joined the bank in 1972 and Mr. Hummert in 1971. Mr. Anderson comes from Merrill Trust Co., Rangor, Me. ■ EUGENE SUMNER has been named representative for BankAmerica Travelers Cheques in Missouri. He is a native of Oklahoma. ■ A M ERGER has been approved by principals of First State, Waynesboro, and Bank of Leakesville. First State will be the parent organization. ■ FRED G. ABNEY has joined Brookhaven Bank as vice president. He was formerly vice president and manager of the branch office of South Central Bank, Brookhaven, and has had prior service with Bay Springs Bank and Gulf National, Gulfport. Missouri ■ THE ST. LOUIS FED has approved formation of Santa Ana Bancorp., Inc., to becom e a holding company through acquisition of Bank of St. Ann. A ccord ing to the bank’s president, Richard J. Pfleging, he had formed the HC as a vehicle to obtain the necessary borrow ing power to maintain local ownership of the bank. Principal stockholders— members of the family of the bank’s founder, the late Charles F. Vatterott Jr.— have agreed to sell their interest to the new HC, which has a loan com mitment of up to $2.5 million from St. Louis’s Mercantile Trust to help finance MID-CONTINENT BANKER for December, 1976 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis M URRAY purchase of Bank of St. Ann’s stock. Mr. Pfleging, immediate past president, Missouri Bankers Association, will head the HC. Oliver E. Sicking, executive vice president and cashier of the bank, will be HC secretary. G IBBO N S Louisiana PFLEG IN G SUMNER M cGEE ■ JOHN M. McGEE has been elected a correspondent banking officer at Commerce Bank, Kansas City. He trav els in New Mexico and Texas and joined the bank in 1975. ■ U N ITED MISSOURI, Kansas City, has promoted Michael L. McAuley to vice president and trust real estate offi cer and Larry E. Russell to assistant vice president in the bond department. They joined the bank in 1969 and 1973, respectively. Two new directors have been named: William J. McKen na, president, Lee Co., Shawnee Mis sion, Kan., and Henry “ Skip” Nottberg III, U. S. Engineering Co. ® JAMES S. W O L F has joined St. Louis County National, Clayton, as marketing officer. 87 Governor Honors Bank ■ BOATM AN ’S BANK of Concord Village, St. Louis County, has elected Ronald K. Clarke vice president and Edward C. Reis assistant vice presi dent. Mr. Clarke was formerly with American Investment Co.; Mr. Reis was with Manufacturers Bank, St. Louis. O k l a h o m a 'Red' Ward Honored ■ CITIZENS BANK, Belton, held a grand opening at its new Charter Plaza Banking Center recently. The bank is the first building to be constructed on the site of the Charter Plaza Shopping Center and is a full-service facility. M issouri G overnor Christopher S. Bond (seated) congratulates W alter C. Branneky (I.), execu tive vice president, St. Johns Bank, St. Louis, after signing proclam ation designating last October 16 as "St. Johns Bank & Trust Com pany D a y ." At right is Fletcher E. W ells, senior vice president and cashier of the bank. ■ ROBERT M. CONW AY has been elected president and CEO, Tower Grove Bank, St. Louis, succeeding Richard E. Fister. Mr. Fister has joined St. Louis University in the new post of assistant to the president for com munity relations. Mr. Conway also was CON W AY elected a bank director and acting chair man. He was executive vice president and senior loan officer. John D. Weiss continues as chairman and president, TG Bancshares Co., holding company of which Tower Grove Bank is the lead bank. Mr. Conway also is vice president and advisory director of the HC. Mehlville Ground Breaking ■ N. J. STARKEY has been promoted to senior trust officer of Kansas City’s Mercantile Bank with overall responsi bility for management of its trust de partment. He joined the bank in 1969, coming from Wells Fargo Bank, San Francisco. ■ BRUCE A. SCHRIEFER has been named credit life insurance manager for Commerce Bancshares and its sub sidiary, CBI Insurance Co., Kansas City. He was formerly with Lexington Bank. ■ D O N A L D LacKAMP has been pro moted from assistant cashier to assistant vice president at First National, Kansas City. He joined the bank in 1974 and is with the correspondent division and livestock loan department. Duncan Samuel, assistant cashier, has been transferred to the investment division and is now an assistant trust officer. New Mexico ■ JACK D. COLLU M has been elected president of Hot Springs National, Truth or Consequences. Mr. Collum was formerly a vice president at First National, Lubbock, Tex., where he served in the correspondent department. He succeeds David L. Underwood, who has been named chairman to succeed John Kipp, who stepped down from that position. Glenn P. "R ed " W ard (I.), s.v.p., Fourth Nat'l, Tulsa, and his w ife, Betty, w ere recognized w ith a plaque at the bank's ann ual correspon dent bank dinner during the recent ABA con vention in W ashington, D. C. Mr. W ard, who is in charge of the bank's correspondent re lationships, w ill retire before the 1977 ABA convention. Reading the inscription is Fred A. Setser, s.v.p. Looking on is Frank X. Henke III, e.v.p. ■ EARL SNEED will retire as presi dent, Liberty National Corp., Okla homa City, on January 31. He will re main as a director of the firm, which controls Liberty National Bank. He has been with the organization since 1965. His resignation will cause the following senior executive changes: T. Joseph Semrod will succeed Mr. Sneed as HC president and will move from bank president to bank vice chairman; W . M. Bell will continue as HC president, and will also be a vice chairman of the bank; K. Gordon Greer will move from bank executive vice president to presi dent, succeeding Mr. Semrod; W . Ken neth Bonds, chairman, trust depart ment, will succeed Mr. Sneed as a member of the executive committee. W . P. Dowling, executive vice presi dent and correspondent department head, will become a director of the bank. ■ ALBERT FLIN N has been named manager, Melrose Branch, First Nation al, Clovis. He was formerly with First National, Santa Rosa. C la y R. N iem eyer (holding shovel), pres., M ehl ville N at'l, breaks ground for the new bank's perm anent home, scheduled to be completed next spring. Pictured, I. to r., are: Frank W. Kurz, technical coordinator, Planned Projects, Inc., St. Louis; Richard L. Ortm ann, pres., Structural Systems, Inc.; C arl B reihan, Sixth District councilm an; Mr. N iem eyer; Robert J. Luecken, v.p. of the bank; Clifford A. Schmid, ch.; W illiam E. Peterson, ch., exec, comm.; and N orm an B. Leppo, pres., Planned Projects. M ehlville Nat'l opened in Septem ber in tem po rary quarters. Its new home w ill contain 5,600 square feet of space. 88 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Died: Guy L. Rogers, 90, chairman, New Mexico Bank, Hobbs. Mr. Rogers is a former president of the New Mex ico Bankers Association. He joined the predecessor of New Mexico Bank in 1937. MID-CONTINENT BANKER for December, 1976 RO YSE N OBLES HU FFM AN BU SCH E B U C KA LEW SH A W ■ T E D W . SHAW has been elected executive vice president and member of the executive committee at First Na tional, Oklahoma City. He has been with the bank since 1964. In addition, Donald P. Buckalew was advanced from vice president to senior vice pres ident, and John E. Busche, Houston Huffman Jr. and Douglas G. Nobles were elected vice presidents; Randolph D. Royse was named vice president and trust officer; Ralph L. Dean was named assistant vice president; and Erma Jean Morton and Jack Taylor were made administrative officers. Robert F. Browne of Oklahoma Coca-Cola Bot tling Co. and Oklahoma Canning Co. was elected a director. ■ FIRST NATION AL, Tulsa, has pro moted Roger L. Austin, Ronald G. Barnes and W . D. Hofstrom to vice presidents and trust officers and Lennis J. Laughlin from assistant trust officer to trust officer. They joined the bank in 1973, 1975, 1962 and 1971, respective ly- ■ STEVEN R. BARNES has advanced from assistant vice president to vice president at City National, Lawton. Marian Barrett has been named as sistant cashier; Jim Cantrell, assistant trust officer; and Paul Ellwanger, au ditor. ■ MEMPHIS BANK has appointed Reginald L. Holley and Walter T. Smal ley Jr. correspondent bank operations officers. Both men joined the bank in 1973. In addition, Edward T. Morlino was named controller and Thomas A. McKelroy was promoted to assistant cashier. HEER SARTOR con J. D ew Jr. to trust officer; Eft W. Birdsong to investment officer and Ste phen S. Mathews to commercial officer. Mr. Sartor joined the bank in 1968, Mr. D ew in 1970 and Messrs. Birdsong and Mathews in 1974. SM ALLEY HOLLEY ■ PAUL E. HEER has been elected vice president and trust officer at First American National, Nashville. He is also head of the investment management di vision. He joined the bank in 1972 and succeeded Hollis E. Johnson III, who resigned to accept a post with the Southern Baptist Foundation. ■ TH IR D N ATION AL, Nashville, has promoted James R. Sartor Jr. to senior vice president from vice president, Ma- ■ FIRST TENNESSEE BANK N.A., Memphis, will be the new name of First National, Memphis, beginning December 26, providing necessary ap proval is obtained. All banks in First Tennessee National Corp. are scheduled to change their names before year-end to First Tennessee Bank, in the case of state banks, or First Tennessee Bank N.A. for national banks. ■ AM ERICAN NATION AL, Chatta nooga, has elected Kennedy H. Clark Jr. and George J. Awad to its trust di vision staff. Mr. Clark is a vice presi dent and trust officer and Mr. Awad is a trust marketing officer. MID-CONTINENT BANKER for December, 1976 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis ■ BANK OF THE SOUTH W EST, Houston, has elected C. Richard Ver million Jr. senior vice president and manager, metropolitan department, and promoted William K. White to senior vice president in charge of the national department. Mr. Vermillion was with a leasing corporation and Mr. W hite has been with the bank since 1974. Named vice president was Joe R. Deese, who joined the bank in 1971. New as sistant vice presidents are Virginia S. Bell and Kenneth G. Teusink. Miss Bell joined the bank in 1957 and Mr. Teu sink has been with the bank since last August. ■ JAMES R. PERRY has been elected a director of First United Bancorp., Fort Worth. He is chairman and pres ident of State National, Odessa, and a director of First National, Fort Worth. He is expected to become president of First of Fort Worth next year. ■ STANLEY JARM IOLOW SKI has been promoted to senior vice president at First City National, El Paso. He joined the bank in 1967. In other ac tion, the bank has elected Terry O ’Don nell senior vice president and director. He was formerly with First City Na tional, Houston, which he joined in 1969. ■ M ICH AEL D. W ILLIAM S has been elected senior vice president and com p troller at First City National, Houston. He joined the bank in 1974 and was formerly vice president and comptroller. In other action, the bank elected Mal colm R. McArdle, William C. McCain Jr., Fred H. Mitchell, Lawrence J. Pet89 ru, Vernon L. Pool and W oodrow W . Scott vice presidents. Mr. Scott is in the regional and correspondent banking departments. New assistant vice presi dents are Russell C. Joseph, Robert G. Smith, G. C. Worry and Rudolph F. Zepeda. John J. Kutac was promoted to assistant vice president and trust officer. Outdoor Cookout Sparks Customers To Exchange Deposit for Grills ■ JOHN F. GEIS, senior vice presi dent, First Security National, Beau mont, and 1968-69 Texas Bankers As sociation president, will retire Jan uary 1 after 43 years in banking. He joined the bank in 1960 and is head of its marketing division. Prior to that, he was with First National, Fort Worth; Second National (now Bank of the Southwest), Houston; and Farmers Na tional (now First National), Salina, Kan. • índex to Advertisers Advertising Concepts ..................................... 69 Aetna Business Credit .................................... 38 American Fletcher Nat’l Bank & Trust Co. 21 American Nat'l Bank & Tr. Co., Chattanooga 63 Associates Commercial Corp.......................... 29 Bank Board Letter .................................... 70, 77 Bank of America ............................................. 9 Bank of Oklahoma ........................................... 53 Barclay Hotel ................................................... 68 Citicorp .............................................................. 55 Commerce Bank, Kansas City ..................... 25 Commercial Nat’l Bank, Kansas City, Kan. 86 De Luxe Check Printers, Inc.......................... 35 Deposit Guaranty National Bank ................. 37 Detroit Bank & Trust Co................................. 82 Electronic Teller Installation Manual ....... 23 Farmers Grain & Livestock Hedging Corp. . 80 First Alabama Bancshares ............................ 79 First American Nat’l Bank, Nashville ......... 31 First Boston Corp............................................... 17 First City Nat’l Bank, Houston ..................... 75 First National Bank, C h icag o ........................... 67 First National Bank, Jackson, Miss............. 7 First National Bank, Kansas City ............... 81 First National Bank, St. Louis ..................... 92 First National Bank of Commerce, N.O. . 3 First Oklahoma Bancorp.................................. 61 Fourth National Bank, Tulsa ........................ 45 Harland Co., John H......................................... 11 Harris Bank, Chicago ..................................... 71 Harrow Smith Co............................................... 84 Heller & Co., Walter E..................................... 59 Kansas Bank Note ........................................... 83 Liberty Nat'l Bank & Trust Co., Okla. City . 2 MGIC-Indemnity Corp................................... 56-57 Manufacturers Hanover Trust Co................47-50 Memphis Bank & Trust Co...................... 13, 73 Mercantile Bank, St. Louis ............................ 5 National Stock Yards Nat’l Bank ................. 91 National Union Fire Insurance Co................ 33 Risk & Insurance Management Guide ....... 78 Scarborough & Co............................................ 27 Union Bank & Trust Co., Montgomery, Ala. 84 United Missouri Bank, Kansas City ........... 15 Verdin, I. T., Co., Cincinnati ........................ 64 Whitney National Bank .................................. 65 BANKERS We currently have a number of outstanding opportunities with leading midwest banks for banking officers in trust lending, marketing, operations, financial, etc. A ll fees paid. Send resume in strict confidence to Tom Roberts, don HOW ARD PERSONNEL 69 W. W ASHINGTON ST. CHICAGO. ILL. 60602 (312) 332-2341 An executive Recruiting & Placement Agency for the Banking community. 90 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Richard Hughes, pres., Elgin (III.) Nat'l, presides over cookout in front of bank. Shown are grills featured as incentives. HE FAT was in the fire this summer at two banks in Elgin, 111. But instead of an adverse reaction, customers of the bank wore smiles as they exchanged deposit money for outdoor grills. Some customers received tasty ham sandwiches, too. For the second year in a row, the people at Elgin National and Elgin State pooled resources to get new ac count dollars. This year’s promotion was tied in with the bicentennial and, according to a spokesman, the whole town “ got involved." “ W e are in an area with a large number of families,” said Robert P. Abate, chairman of the two banks. “ These people enjoy outdoor activities and appreciate the value that we were able to offer on the grills.” Elgin is located west of Chicago. Two models of grills were featured as incentives— one large, one smaller. The large grill could be purchased for $49.95 with a $200 deposit to either a savings or checking account at either bank. Those depositing more than $1,000 could get the large grill for $42.95. If they opted to de posit more than $5,000, the grill could be had for $35. Re tail price is $69.95. The smaller grill was available at $12.95, $9.95 or $5.95, depending on the size of the deposit. Retail price is $24.95. Nearly 400 grills were moved during the promotion, which ran during the month of July. In addition to newspaper and radio ads, statement stuffers and point-of-purchase displays, the banks scheduled two special events to promote the grills. The first was an evervone-invited picnic outside each of the banks. The grills were used to cook hams and ham sandwiches were given to anyone passing by who was hungry— and who wasn’t? Later in the month, a drawing was held at which three large grills were given away. Approximately 700 customers entered the contest, according to Mr. Abate. “ W e have received excellent results from the pro motions,” he said. “And I’m sure that, considering the amount of new business they have brought in, w e’ll con sider promoting the grills again next year." • • T MID-CONTINENT BANKER for December, 1976 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis from the Board of Directors and all your friends a t ... Y O U R BANKER'S B A N K THE NATIONAL STOCK YARDS NATIONAL BANK OF NATIONAL CITY N A T IO N A L S T O C K YARDS. ILLIN O IS 62071 TIMEOUT! WE MADE THE BIG PLAIT BUT SOMEONE BLEW A W HISTLE at our main office and stadium facility in In 1972 w e becam e the first bank in Missouri to offer customers fully auto downtown St. Louis, and at the Chippewa matic banking services. With our Banking Center in South St. Louis. B A N K 24 terminals, our customers B A N K 24 services are also available at have been able to fulfill most of most of the other First Union Banks their banking needs at their con in Missouri. Fortunately, machines venience, 24 hours a day. located on bank premises are not T h e public responded very affected by the court’s ruling. positively to this new service. T h e closing of B A N K 24 at Accordingly, in 1974 w e sought to Jay Bee and Emerson does not expand the benefits of this new era signal the end of a widely in banking technology and customer supported campaign throughout service. W e installed fully automated the state to modernize Missouri’s teller m achines—as part of our banking laws. Efforts will B A N K 24 system —at a supermarket continue to assure that banks and an industrial plant. For the first are allowed to compete on a time in Missouri it was possible to obtain more equal basis with federally cash and perform other personal banking trans chartered savings and loan associa actions 24 hours a day without going to the bank. tions, credit unions and other financial institutions. These regulated institutions This breakthrough in customer convenience are currently allowed to provide services was soon challenged. Despite a favorable ruling which banks have been denied. from the U.S. Comptroller of the Currency, the W e shall continue to contend that automated Commissioner of Finance for the State of Missouri teller machines, like telephones, are simply an held that automated teller machines located away from a bank violated the state’s branch banking laws. electronic means of com m unication between a bank and its customers and, therefore, are legal. In the interest of providing better banking If you agree with us that the “officiating” services and to clarify this ruling, w e continued the has denied the Missouri banking industry and legal process through the U.S. Court o f Appeals bank customers the benefits of a technological and the U.S. Supreme Court, which recently winner, help us get the laws modernized. Write declined to hear our case. or contact your state representative and state Regretfully, our “big play” for improving senator and tell them you are in favor of two things: banking services has been called back. T h e farreaching benefits and greater convenience that 1. 24-hour-a-day banking with automated teller off-premise electronic banking promised must be machines located conveniently in shopping foregone. A t least for the present. centers, grocery stores, office com plexes and Effective immediately, our B A N K 24 auto other public locations. mated teller machines at Jay Bee supermarket and 2 Fair competition and equal opportunity for all at Emerson Electric Company in North St. Louis financial institutions in Missouri. County will be closed. First National Bank in St. Louis will continue to operate B A N K 24 terminals W e’re convinced it is the right play to call. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis . 14 3 3 7 3 First National A First Union Bank Bank in St. Louis
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