The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
The Financial Magazine of the Mississippi Valley & Southwest https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis JANUARY, 1982 "They don’t just do the job, they go the extra mile for us. W hat more could you want ? ” “Liberty has been our correspondent bank for more than ten years now. We use a wide variety of services, including their Trust Department. “When we call, they respond — quickly. And they always seem ready, willing, and able to handle our business. “We’re very high on the Correspondent Department. When people not only do their job, but go the extra mile with you to make sure it gets done right, what more could you expect or want?” Don Donaldson President Union Bank and Trust Bartlesville, Oklahoma Some people look at their jobs as just that — jobs. Liberty’s Correspondent Bankers look at their jobs as an opportunity to help people. So they don’t turn on at eight o’clock and turn off again at five. When you talk to our correspondent bankers, they listen. And by the end of your conversation they’re just as anxious as you are to take care of whatever need you’re calling about. You II find, as Don Donaldson has, that your Liberty correspondent banker will go the extra mile with you, to see the job gets done right. Because helping people isn’t just a job at Liberty, it’s a way of life. OUR CUSTOMERS CALL IT SUPERIOR SERVICE. W E CALL IT BUSINESS AS USUAL BECAUSE... W E CARE ABOUT YOU. LIBERTY THE BANK OF MID-AMERICA Liberty National Bank and Trust Company / P.O. Box 25848 / Oklahoma City, Oklahoma 73125 / 405/231-6164 / Member FDIC https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis CORRESPONDENT QUIZ 1. Who has the fastest-growing Correspondent Bank Department in the South? 2. Who was the first to offer seminars on new Banking regulations and laws featuring leading national advisors and government officials? 3. Who continues to offer those seminars and regular updates on how to maximize profits at no cost to correspondents? 4. Who offers correspondents special insurance programs at low group rates? 5. Who is Big enough to handle every correspondent need, yet small enough to handle each one of them, one at a time, with expert personal attention? 6. Who gives you senior experience and expertise on everything.. .from transit, data processing, Visa and MasterCard, draft collection, investments, federal funds, safekeeping, credit assistance, loan participation, trust services, wire transfers and Business referrals...to seasoned advice on advertising, marketing, personnel training and even the design and MID-CONTINENT BANKER for January, 1 9 8 2 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 3 MID-CONTINENT BANKER The Financial Magazine o f the Mississippi Valley & Southwest “L etters Editor” V _____________________________ y 7 8 , No. 1 January, 1982 Volume FEATURES 20 FORECASTING C&l LOANS An “iffy” proposition in ’82 24 COMPETITIVE EFFECTS OF CHANGE: They can b en efit com m unity banks 28 BANKING RIPE FOR STRUCTURAL CHANGE Says C hase M anhattan presid ent 30 STABILIZING THE ECONOMY: C utting budget deficit is vital 36 STATE LEGISLATIVE ROUNDUP Stru ctu re, usury, bankruptcy top issues 42 NEW YEAR BRINGS 'EVERYMAN' IRAs Banks last to announce rates 46 FOCUS GROUPS REVIEW IRA OPTIONS H elp bank d eterm in e product DEPARTMENTS 6 THE BANKING SCENE 8 WASHINGTON WIRE 10 FED ANSWERS QUESTIONS 12 BANKING WORLD 12 CORPORATE NEWS STATE NEWS 72 ALABAMA 72 ARKANSAS 72 ILLINOIS 74 INDIANA 74 KANSAS 75 KENTUCKY 75 LOUISIANA 75 MISSISSIPPI 75 MISSOURI 77 TEXAS 76 NEW MEXICO 76 OKLAHOMA 77 TENNESSEE EDITORS Ralph B. Cox ....... Publisher Lawrence W. Colbert Assistant to the Publisher Pamela Walsch Assistant Editor Rosemary McKelvey .. Editor Jim Fabian . . . . Senior Editor Eleanor Wainwright Editorial Assistant M ID-CONTINENT BANKER Editorial/Advertising Offices St. Louis, Mo., 408 Olive, 63102. Tel. 314/4215445; Ralph B. Cox, Publisher; Marge Bottiaux, Advertising Production Mgr. Subscription rates: Three years $27; two years $20; one year $12. Single copies, $2.50 each Foreign subscriptions, 50% additional. Milwaukee, Wis., 152 W. Wisconsin Ave., 53203, Tel. 414/276-3432. Commerce Publications: American Agent & Bro ker, Club Management, Decor, Life Insurance Selling, Mid-Continent Banker, Mid-Western Banker and The Bank Board Letter. MID-CONTINENT BANKER is published monthly by Commerce Publishing Co., 408 Olive St., St. Louis, Mo. 63102. Officers: Donald H. Clark, chairman emeritus, Wesley H. Clark, president; James T. Poor, execu tive vice president and secretary; Ralph B. Cox, first vice president and treasurer; Bernard A. Beggan, Lawrence W. Colbert, William M. Humberg and Don J. Robertson, vice presidents: David Baetz, assistant vice president. Printed by The Ovid Bell Press, Inc., Fulton, Mo. Controlled circulation postage paid at St. Louis, Mo., and at additional mailing offices. 4 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis To the Editor: I read, with interest, the report on our usury/variable-rate workshop in M ount Vernon in M id -C o n tin en t B an ker for November, 1981. I wish to thank you for the coverage. However, after reading the article, I had to ask myself did I really say that. I am not contesting that you did not fairly re port what you heard, I am saying that I don’t think I intended to say what you reported. It is true that our interest act is a “mess of pottage.” However, I am not sure there is any way we could get ceilin gs rem oved oth er than the method used. When you represent voters who believe they can put their money in money-market funds and re ceive unlimited rates on the deposit, yet at the same time expect to borrow money from the community bank at a limited rate of interest or usury limit, you know you have problems in draft ing needed legislation. It would be nice to get clear-cut and easily inter preted legislation. However, in the us ury area, I don’t think this could ever occur. My basic problem in the meeting had nothing to do with the removal of usury limits. As far as the new act is concerned, there are no limits. Bank ers can establish any rate they wish, or the borrower will accept. The big diffi culty presented at the seminar had to do with variable-rate loans. There are two places in the present interest act in which the legislature has prohibited a variable-rate loan. Under one condi tion, the law prohibits a provision pro viding for a change in the rate of in terest contingent on a change in the law. The other restriction was the sub je c t of most of the meeting — the limitation on variable-rate loans se cured by residential mortgages. Most bankers are opposed to vari able-rate deposit instruments. Their opposition is for the same reason that borrowers oppose variable-rate loans. Each is subject to a sense of unpre dictability. What I was trying to say in the semi nar is this: Variable-rate loans can be made under this act. Aware, however, of the expressed legislative disdain for variable-rates — and the borrower’s disdain — lenders must move with great caution in this area. In case of (C ontinued on page 70) MID-CONTINENT BANKER for January, 1 9 8 2 Does your correspondent banker handle each loan request personally? Ours do — start to finish. How many times have you heard this? “ Sorry, I’ll have to refer you to our loan committee. Nothing personal, mind you.’’ Mercantile decided long ago our cor respondent banks shouldn’t have to put up with that. So we gave our account officers the authority to approve loans. We found it saves a lot of running around and wasted time. Especially for you. Not just on commercial loans, either. Each officer also takes care of per sonal and agricultural loans, plus loans for bank stock and mergers and acquisitions. He’ll even help you form a syndicate, if needed. As you might expect, this places a big responsibility on the shoulders of our account officers. So we try to make sure they stay at top form. Each officer attends seminars on credit and finance to keep him up-to-date on the latest trends. Furthermore, each officer has 1600 Mercantile people backing him up all the way. But he knows the full respon sibility for your satisfaction falls squarely on his shoulders. So why not call a Mercantile Banker today? He’s one guy who won’t pass you on to some committee. We’re with you. C orrespondent Banking Division M ercantile Trust Company N.A. St. Louis, MO (314) 425-2404 MID-CONTINENT BANKER for January, 1 9 8 2 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis M = R c n rrn i= BRfK 5 The Banking Scene By Dr. LEWIS E. DAVIDS Illinois Bankers Professor of Bank Management Southern Illinois University, Carbondale Defining a Banker in the Year 2000 OR TH E last year or so I have curred and that no longer could one be been working on a manuscript as precise in defining the terms. about budgeting, forecasting and plan Today the wide use of NOW ac ning for banks. In it I have tried to counts, cred it cards and m oneyprovide some insights on what banks market funds by savings banks and would need in determining their fu S&Ls has made the distinction be ture. tween financial intermediaries less I was reminded of a scroll near the precise. Bankers whose opinions I office of Marcus Nadler, who once was value highly stress that the years ahead director, Institute of International F i will be characterized by greatly inten nance, which I served as a research sified com petition due to the ho associate. Marcus Nadler was the mogenizing of financial institutions. father of Paul Nadler, banking author Authorities point out that the num ity associated with Rutger’s Universi ber of financial institutions in the years ahead probably will be down sharply tyfrom the present figure. I am tempted to agree, but I would add that while Financial services available to the number of institutions may be the public in the future will be down, the number of facilities and ser more diversified, due partly to vices will be up. That is, financial in termediaries, including banks, will not domestic innovation but also as fail in the conventional sense, but for a result of more penetration of the most part will be absorbed by the American market by for stronger or more vigorous institutions. Financial services available to the eign institutions. public in the future will be more diver sified, due partly to domestic innova The scroll bore the title “What is a tion but also as a result of more banker?” It included this statement: penetration of the American market by “A banker is 50% accountant, 50% foreign institutions. Unit bankers will attorney, 50% financial counselor, support the concept of geographic 100% a gentleman, 50% a marketing limitations on the spread of banking, individual, 50% a human relations au especially across state and national thority.” The fact that these figures to frontiers. Still, it is likely that these tal several hundred percent indicates restraints will be penetrated by in that a banker must be larger than life. novative financial and non-financial in The concluding sentence was, “Any stitutions such as Sears, Roebuck. one less is a pawn broker.” In a similar context, a generation ago Those rather inspirational lines had banking’s major expense was for labor. a lot of truth in them back then. It’s The next highest expense was for in fascinating to conjecture if that defini terest paid on deposits. For some years tion of a banker would need to be mod now, this has been reversed. It’s evi ified to fit the banker of the year 2000. I dent that banks are responding to this reversed situation by more explicit suspect it would. One of my early books on banking pricing of services, which, some au defined a bank and money. In a subse thorities point out, stimulates com quent edition, I noted that the pre petition and market shopping. This vious definitions had been relatively undoubtedly holds true for larger com well accepted when first published, mercial accounts. However, conve but that significant changes had oc nience probably will persist as the ma F 6 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis jor reason for opening an account in a financial institution and maintaining it there. But, “convenience” may take on a somewhat different meaning in the year 2000. Geographic convenience may change to technological conve nience provided by ATMs and POS terminals. Major price breakthroughs will occur in devices that can link together television, telephone and other transmitting devices that will contact not only the bank but other sources of service, such as merchants, news vendors and sporting informa- Giant banks, such as Continen tal Illinois National in Chica go, are experimenting success fully with locating some em ployees at remote sites from which they can conduct the bank's business electronically. tion services. Banking has been described as a “peoples” industry, where face-to-face transactions between bankers and cus tomers are the rule. By the year 2000, much banking will not be consumated by direct contact between the bankers and the depositor or borrower. Such technology is not for the Buck Rogers era, but is possible today. A likely development is a reversal of the trend toward early retirement. W hereas now approximately twothirds of the population retire before age 65 — frequently at age 60 or 62 — it’s likely that the impact of inflation on social security and private pension plans will move the retirement age up ward, possibly beyond 70 years. Banking is an industry in which women have commanded a higher pro portion of positions than males. It’s (Continued on page 40) MID-CONTINENT BANKER for January, 1 9 8 2 99 years of continuous service. . . W ith 99 years of co rre spondent banking experience, the Whitney can guarantee your cus tomers the excellent service they expect. Our many capabilities in clude: wire transfer, transit-check collections, credit inform ation, com p u ter service, coins and currency, bonds and international banking. When you’re thinking about business in New Orleans and Lou isiana, think about the Whitney. Nobody knows New Orleans like the Whitney, the bank with 99 years of continuous service. Use this WATS number for Correspondent Banking Department: 1-800-535-9151 In Louisiana use 1-800-562-9016 A Great Bank For A Great City MID-CONTINENT BANKER for January, 1 9 8 2 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 7 W a s h i n g t o n W ire Trying to Agree on Deregulation Definition ORE often than not, winning an argument is a matter of being in a position to define the terms argument. That axiom of politics cer tainly is being proved true in the bat tles over deregulation of the financial industry. As Congress struggled toward ad journment in December, and as the regulatory agencies wrestled with the essential issues of implementing de regulation, it became painfully clear there are at least as many different def initions of deregulation as there are financial trade groups. For the specialized thrift institu tions, and especially for the S&Ls and their cheerleading regulatory agency (the Federal Home Foan Bank Board), deregulation means holding on to their deposit interest-rate differential while absorbing escalating increm ents of bank-like powers. In this endeavor, thrifts have not hesitated even to use fear of failures resulting from their own weaknesses to attempt to leverage a widening of their powers. On another front, the securities in dustry has a few worries of its own about deregulation. From a banker’s point of view, that industry operates virtually w ithout com petitive re straints and enjoys an enviable flexibil ity in developing new products and services to attract funds from every city and hamlet in the nation. The chief concern of the securities industry is that banking not be deregulated too quickly — in fact, the longer it takes, the better. Thus, until recently, any and all attempts to broaden banks powers to offer their customers more investment opportunities were resisted fiercely by the securities industry. The latest de velopment is word that the securities industry has decided that on two points — underwriting revenue bonds and offering bank mutual funds — it is prepared to yield, but only if granted to banks under terms of an Administra tion proposal that probably will tie the legislative process in knots for years. M Editor s Note: This column was prepared by the ABA s public relations division. 8 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Generally, the belief in Washington is that this new attitude from the secur ofities the industry represents an effort to head off any wider deregulation of banks’ options in the offering of invest ment services and to delay these lim ited new options for bankers for a long time. So the securities industry’s def inition of deregulation appears to be yielding as little as possible as slowly as possible, while presenting a procompetitive demeanor. W ith m oney-m arket-m utual funds approachng the $200billion mark, and continuing to grow at nearly $3 billion per week, the question is how long regulated depositories can afford to remain in disagree ment on the necessity of dereg ulation. On the other hand, the credit-union industry remains a staunch voice in favor of more complete deregulation. Fed by its federal regulatory agency, that industry is far ahead of all other d epositories in term s of depositinterest-rate deregulation. Indepen dent of the Depository Institutions Deregulation Committee, the Nation al Credit Union Administration moved on its own in November to remove all interest-rate ceilings from individual retirem en t accounts and Keogh accounts. For the American Bankers Associa tion, the definition of deregulation was set some years ago by the 400-member Banking Feadership Conference and has been reaffirmed frequently by that group. Deregulation is seen as a broad process. First and foremost, deregula tion should encompass removal of de posit-interest-rate ceilings; this is the vehicle for eliminating the interestrate-differential advantage that has been unfairly enjoyed by the thrift in dustry. It also is apparently the only way to achieve the level of flexibility in terms of design of deposit products and ser- vices that depository institutions must have to compete with all the near banks — insurance companies, secur ities firms, big retailers and even gaso line chains. Second, deregulation should in clude creation of new competitive op tions for any institution that chooses to take advantage of them. Such options should include the opportunity to offer bank mutual funds, to underwrite rev enue bonds and to offer additional types of insurance coverage — to name just a few examples. Next, deregulation should remove com petitive constraints that lim it banks’ ability to serve their customers. This category of reform must include total removal of usury statutes and a federal override of state prohibitions of due-on-sale clauses. Both sides of the ledger must be freed. And finally, deregulation should in clude removal of costly and unneces sary compliance burdens imposed on financial institutions — unnecessary overlapping of the C om m unity Reinvestment and Home Mortgage D isclosu re acts, the excessiv ely burdensome provisions of the Finan cial Institutions Regulatory Act, the continuing morass of the Truth-inLending Act and a host of others. Equally im portant, the adversary atmosphere and attitudes that char acterize com pliance exam inations must be turned around, and the entire examination process should be re turned to a proper first emphasis on safety and soundness. Ironically, while disagreements on the correct definition of deregulation remain within the regulated financial industry, most of those operating out side banks’ constraints profess a strong belief in deregulation of all aspects of financial competition. The ABA’s approach to deregulation as the road to competitive equity was the explicit assumption underlying the 1980 Depository Institutions Dereg ulation and Monetary Control Act. That law’s actions on the competitive front basically encompassed a trade-off of certain limited bank-like powers for (C ontinued on page 51) MID-CONTINENT BANKER for January, 1 9 8 2 volunteer, America's Specialists in increasing Credit Insurance Profits. ’90 ’82 ’83 j. J J ’81 m mm The narrowing interest margins in today’s financial community have prompted banks to look with concern to increasing their market penetration in “ non-interest” income areas such as credit insurance. Increased “ non-interest income” from credit life sales can be accomplished without addi tional capital, without risk, and without addi tional personnel. Volunteer has developed a loan officer credit sales training program that is second to none. This training, so important today as lending and products become more sophisticated, is the key to profitability in credit insurance. The Volunteer combination of product innova tion and loan officer training strengthens your competitive position in consumer lending. What better way to increase your “ non interest income” and profits than through in creased credit insurance sales? If this is your objective . . . Volunteer is your specialist. Call or write on your letterhead for details to: Keith Wallace, Vice President, Cre dit Insurance Sales, P.O. Box 1369. Chatta nooga, Tennessee 37401, 615-756-2887. ^ Volunteer State Life Insurance Company MID-CONTINENT BANKER for January, 1 9 8 2 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 9 For faster service on Fed Answers Reg Questions BANK CREDIT INSURANCE John W. Rosbrugh, examiner in the St. Louis Fed’s consumer and community affairs depart ment, answers common questions about federal regulations affecting most banks. Information given here reflects Mr. Rosbrugh’s opinions, not necessarily those o f the St. Louis Fed or the Board o f Governors. CALL THESE SPECIALISTS Harold E. Ball • Carl W. Buttenschon John E. King • Milton G. Scarbrough 214 / 559-1173 INDUSTRIAL LIFEINSURANCECOMPANY P.O . Box 220998, Dallas, Texas 75222 nofRvsfì AmembercomPar,yo| U ua5U Republic Financial Services. Inc Questions About the Truth-in-Lending Policy Guide Will reimbursement mand loans when there is no * be required on de alternate maturity date but mand loans when the vari the finance charge disclosure ab le -rate featu re has not is based on less than the halfbeen disclosed and the rate is year period (one year after increased? September 30)? Q Yes, reimbursement • will be required if the financial institution has not made the variable-rate disclo sures, provided the consumer has not been notified in writ ing of the rate change on or before the date of the change. Each tim e the rate is changed and the customer is not given written notification of the new rate, the period(s) will be treated as if no APR was given, and the Policy Guide will apply. The rate on the most recent notification to the customer will serve as the contract rate. A The actual fin an ce• charge d isclosu re should be based on the pre scribed d isclosu re period (one-half year now, one year after Septem ber 30), not on some period less than that re quired when the instrument has no alternate maturity date. (Refer to Section 226.4(g) of cu rren t R egulation Z and 226.17(c) (5) of new Regula tion Z). Reimbursement will be re quired if, after taking ap propriate to leran ces into account: (1) the disclosed fi nance charge is less than the actual finance charge for the Will reimbursement initial req u ired disclosu re * be required for de period, and (2) the demand mand loans with disclosures loan has been on the institu based on a half-year maturity tion’s books past the period (one year after September 30, for which finance-charge dis 1982) when the demand loan closures were made. co n tra ct calls for periodic R eim bu rsem en t will be payments that will amortize calculated for the required the loan over a definite time disclosure period only. The period? amount reim bu rsed to the Yes, a formal amorconsumer will consist of the • tization schedule re dollar amount of the actual fi corded in the demand-loan nance charge paid less the fi contract is, for the purpose of nance charge disclosed to the disclosure, equivalent to an consumer. alternate maturity date, and This con cep t applies to disclosures should be based both straight and variable-rate on the amortization schedule. demand loans whenever the disclosed finance charge is Will reimbursement less than the actual finance charge. * be required on de- A Q A Q 10 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis MID-CONTINENT BANKER for January, 1 9 8 2 90 MV NATIONAL CD . RALFS W hen fixed rate investments are all too redictable. re have a variable solution. If you’re looking for help with asset/liability management. If you’re looking for help in offset ting the volatility of interest rates. Then look to First National Bank of Kansas City. We’re considered a pioneer in the Kansas City market in variable CDs, so we know what we’re doing. More important, we know how to do it for you. If your problem with fixed rate in vestments is the fact that they’re fixed, we suggest you try our variable solution. Call and ask for any of our correspondent officers. Q FIRST NATIONAL ________ DiarterBank KANSAS CITY 10TH AND BALTIMORE □ BOX 38 □ KANSAS CITY, MO 64183 □ (816) 221-2800 □ MEMBER FDIC MID-CONTINENT BANKER for January, 1 9 8 2 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 11 BANKING W ORLD ana, northern Tennessee and West Virginia. McMAKIN FOWLER Jim Fowler has been named to a new post as customer-service representa tive at the Federal Reserve Bank of Kansas City. Mr. Fowler is a veteran of nine years in the correspondent bank ing division of Commerce Bank, Kan sas City. He also worked with the U. S. Department of Commerce and as a private management consultant before joining the Kansas City Fed. Ronald A. McMakin has been pro moted at First National, Louisville, from com m ercial cred it officer to senior correspondent services officer. He calls on banks in Kentucky, Indi- Corporate News Roundup WARF DENNIS SCHNORR • Brandt. Joseph L. Schnorr has been named sales administration man ager, with responsibility for customer relations, sales order processing, price-book maintenance and sales data recording. He has 10 years’ experience in general accounting systems, data processing and financial reporting. • Diebold. Alben W. (Al) Warf has been appointed vice president/general manager/engineering, bank systems division. He has divisional manage ment responsibility for the engineer12 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Northern Trust Corp., Chicago, has filed applications with regulatory agencies to permit Security Trust C o., Sarasota, F la., to become a full-service commercial bank. Security Trust is one of Northern Trust’s Florida sub sidiaries. Security Trust was chartered as a national bank in 1977, but its orga nizers limited the firm’s activities to those of a commercial bank’s trust de partment. The new action would re move the restrictio n on Security Trust’s powers and enable it to operate as a commercial bank in addition to its trust functions. BankAmerica Corp., San Francisco, has signed a letter of intent with Charles Schwab Corp. under which the HC would acquire the parent of Charles Schwab, the nation’s largest discount securities brokerage firm. Charles Schwab has 38 offices in the U. S. and had revenues of $42 million in the year ending Septem ber 30, 1981. ing/research/development activity and for coordination of corporate engineer ing functions. He formerly was with NCR Corp. • LeFebure. James B. Dennis has been appointed sales specialist at the D enver branch, which serves the counties of west Texas and southern New Mexico. He resides in El Paso. • Bank Building Corp. Myron A. Carpenter and Harvey B. Leaver have been promoted to corporate vice president/finance, Bank Building Corp. (BBC), and corporate vice president/ president, Manufactured Buildings, In c ., resp ectiv ely . M anufactured Buildings is a BBC subsidiary with plants in Florida and New Mexico. BBC also has promoted Richard C. Alt CARPENTER LEAVER New ABA Rate Number WASHINGTON, D. C. — Effec tive bank maximum interest rates on CDs can be learned immediately now by bankers who call 1-900/210RATE (1-900/210-7283) from 8 p.m. Monday through noon Tuesday east ern standard time. The service be gan January 4 and costs 500 a call. The ABA communications council offers this new service in response to requests from bankers for easy, has sle-free access to rate information. Included in this service are the weekly six-month money-marketCD rate, the biweekly 30-month rate and the all-savers rate, which is based on results of Treasury 52-week T-bill auctions. Rates are announced for the sixmonth and 30-month CDs from 8 p.m. Monday to noon Tuesday (EST) each week. All-savers-CD rates are announced from 8 p.m. every fourth Thursday to noon the next day. These rates previously were announced on the toll-free 800 Washington Wire service. III to sales manager, Depositee, a BBC division. He formerly was new busi ness development manager for the midwestern division of B B C ’s financial facilities group. Mr. Carpenter joined the St. Louis-based BBC in 1972; Mr. Leaver and Mr. Alt have been with the firm since 1977. • Westcap Corp. S. David Arnspiger has been elected chairman of this Houston firm. He formerly was first vice president/co-manager, bond de partment, Underwood Neuhaus & Co. Before, that, Mr. Arnspiger was senior vice president, Rowles, Winston & Co. • John H. Harland Co. This Atlan ta-based check printer has opened a plant in San Antonio, Tex., to serve financial institutions in southeastern Texas. ALT MID-CONTINENT BANKER for January, 1 9 8 2 New Orleans banking tradition is at work throughout the Gulf South. First National Bank of Com m erce has a history of working closely with its correspondent banks throughout the Gulf South for the benefit of their custom ers. W hether your needs involve multimillion-dollar syndicated loans, o r loan participations on a smaller scale, First NBC has the experience to help. We’re here to help you with your check processing, wire transfers and Federal Funds transactions, too. If your money m arket needs go beyond routine Federal Funds transactions, we also specialize in the purchase and sale of various money market instruments and provide automated bond portfolio services to help you manage your bank’s investment securities, Years ago, our ancestors brought to you the m ost m odem correspondent services of their tim e. Today, we have the same com m itm ent to service, supported by m odem banking methods and technology, because at First NBC, Correspondent Banking is m ore than just a line of business— it’s a tradition. First NBC N ew O r le a n s b a n k in g tr a d itio n 210 B aronne Street, New Orleans, Louisiana 70112. Phone 1-800-462-9511 in Lou isiana or 1-800-535-9601 from Mississippi, Alabama, Arkansas, Oklahoma and East Texas. Outside these areas, call collect 504-561-1371 Member FDIC MID-CONTINENT BANKER for January, 1 9 8 2 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis The Financial Race Is on! W ho W ill W in — W ho W ill Lose The Financial Institution Competition Race? By Carl W. Olson, Senior Vice President/Marketing, Northwest Bancorp., Minneapolis I ntroduction : Predicting the f u ture in the fin an cial m arkets is a som e w hat hazardou s occu pation at best. Most “crystal-ball g a z in g ’ at the b e ginning o f each new y ear norm ally is restricted to the “y ear a h e a d .” In this case, the author, p erh ap s a bit f a c e tiously, peers into the clou ded, distant year o f 1987! Mr. Olson, w ho has o ffe r e d his p ro je c t io n s in a n u m b e r o f s p e e c h e s around the country, seeks to ham m er hom e results o f actions (o r inactions) is new is the pace of change, now so by various segm ents o f the fin an cial rapid that it s becoming increasingly industry. He seeks to fin d answ ers to difficult to respond properly. What is needed is an ability to antici the questions: W ho wins? W ho loses? W ho stays in business? W ho winds up pate change and manage it to our serving the interests o f the fin an cial advantage as it occurs. This is easy to say, but hard to do; particularly in view consum er? of the major environmental impacts A dm ittedly, his answ ers a re con jectu ral. N onetheless, every ban k in concerning: 1. Energy. 2. Legal and the nation will b e answ ering his qu es regulatory change. 3. Cultural and de tions in one m anner o r an oth er. Will mographic shifts. 4. Interest-rate vola your institution be a w inner o r loser in tility. The net of it all is that we must be 1987? — The E ditors. * * * come adept at operating in an environ ment in which change is the only con n t i c i p a t i n g and m an ag in g stant and uncertainty the only certain - change — that’s our most signifi tycant opportunity. Change is not new; This brings me to the first section of it s a normal part of our business. What this article where I will try to provide A Tips to Make Your Bank a Winner • Take a big-picture view of future opportunities and threats • Build your bank's planning capabilities to prepare for the future • Strive to help your respec tive institutions to be win ners, not losers, in the chal lenging '80s 14 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis some perspectives on the future with what I call “fu tu re hindsight.’’ After all, nothing improves vision like 20/20 hindsight. It s the year 1987. There has been a revolution in the financial-services in dustry during the past seven years. W ithin that industry, there have been some winners and some losers. L et’s use some “future hindsight” to ex amine what the winners did right and what the losers did wrong or didn’t do at all. First, from our 1987 vantage point, let’s look back at the list of significant regulatory changes: • Nationwide NOW accounts au thorized in 1980. • E F T terminals and devices are ruled not to be branches in 1982. • Regulation Q phased out by 1984. • State usury laws eliminated in 1985. • Reciprocal agreements between contiguous states permits holdingcompany expansion in 1984. • This is followed by national inter state banking in 1985. Other environmental impacts also com bine to bring revolutionary changes: • D ram atic increases in energy costs — gas, $3.75 per gallon. • Double-digit inflation becoming a way of life — 15% annually. • Volatile changes in economic con ditions and in money-market interest rates — prime rate ranges from 12% to 18%. • Dram atic technological break throughs of all kinds. • Life-style changes brought about by energy shortages, high inflation rates and dramatic shifts in attitudes. OK, now it’s 1987, and because 20/ 20 vision is possible with future hind sight, let s think about everything we wished w e’d done during the last seven years. It’s all brought about by a comprehensive article that appears in MID-CONTINENT BANKER for January, 1 9 8 2 one of the national publications, such as Fortune, Business W eek, F orbes or W all S treet Jo u r n a l. The journalist who wrote the article was given the assignment to research causes behind the financial-services-industry revolu tion, which resulted in a mass con solidation of financial institutions, with a final reduction of 40% in number of banks and 50% in number of S&Ls. The reporter’s editor said, “Tell our readers what strategic and tactical de cisions contributed to the success of the winners and demise of the losers. After exhaustive research, the jour nalist reported: • Winners defined their business as one of providing customer-satisfying financial services. • Losers said, “We are in the bank ing business. Why do we have to de fine our business any further than that?” • Some losers equated success with overall large market-share position. • O th er losers concentrated on short-range profits to the detriment of market share. • Winners made detailed market assessments and, based on realistic "The challenge for bankers as I see it is to take this future hindsight and change it anyway they like if they don't agree with me, but to use it to help develop their banks to be winners in the '80s. They also must realize that all strategic and tactical actions taken by winners in my future-hindsight scenario had to be based on thoughtful analysis and planning." opportunities, established a balance between profit and growth objectives. • Winners elected to grow in a con trolled fashion so they wouldn’t out strip their financial and human re sources to digest and manage their growth. • Some losers were not able to grow at all — they lacked the vision to see new opportunities and ability to inno vate and compete effectively. • Other losers were innovative, but their go-go philosophy toward growth eventually caught up with them. They ju st couldn’t lose money on every transaction and make it up on volume. • Losers thought they were finan cial department stores and tried to be all things to all people. • Winners segmented the market and aggressively pursued those seg ments characterized by profit and growth potential. • Losers identified market seg ments based solely on geographic or demographic categories. Winners de fined market segments according to com m on needs, values and ability to pay. • Losers defined m arketing as advertising, and they relied primarily on mass media. • Winners used marketing as a busi(C ontinued on page 58) M errill Lynch, Do You Support the Local 4-H? and other civic associations for your officers. 4. Annual contribution to local boy scouts. 5. Contribution to Cotton Produc ers’ Association to aid them at their annual convention. 6. Donation to high school band uni form fund raiser. 7. Donation to local DAR chapter. 8. Purchase 10,000 suckers for chil dren of customers. 9. Send several officers to seminars to learn about the Community Re investment Act. F ebru ary 1. Sponsor local child in beauty pageant. 2. Prize for local school fund-raising carnival. 3. Donation to local VFW chapter. 4. Prize for cleanest city poster con test at kindergarten. Jan u ary 1. Year’s subscription to 10 news 5. Send officer to agricultural semi nar to be better able to serve farm papers for the nursing home. 2. Cocktail party for farmers in concustomers. 6. Bingo gift for charitable fund rais junction with equipment dealer. 3. Annual dues for Rotary Club, D eer. 7. Cocktail party for customers in velopment Association, Farm Bureau he following letter was written by William W. Watson, president, Bank of St. Joseph, La., to the presi dent of Merrill Lynch. It is reprinted with permission from Louisiana B an k e r magazine. Dear Sir: As your firm is now soliciting de posits from our trade area, we felt cer tain you would want to take your share of civic responsibility here in St. Joseph and actively participate in all the things that make our economy prosper, resulting in the production of the funds you solicit. Since a large corporation such as yours undoubtedly operates on a strict budget, I am taking the liberty of assisting you in preparing your 1982 budget by chronologically listing the activities you will want to include in your 1982 program. T MID-CONTINENT BANKER for January, 1 9 8 2 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis conjunction with agricultural chemical company. M arch 1. Donation to local school fund rais er for athletic program. 2. Donation to local United Fund. 3. Donation to volunteer fire depart ment. 4. Donation to 4-H Club. 5. Furnish speakers for program at various civic clubs. 6. Donation to Little League base ball program. 7. D onate scoreboard for local school gymnasium. I suppose you understand what I am writing about by now, so I won’t spend any more of my time on this. I have to get busy with my program for the Ro tary Club and be prepared to answer a lot of questions about money-market mutual funds. Yours very truly, William W. Watson, President Bank of St. Joseph, La. E d ito rs note: M r. W atson says he has receiv ed no reply fr o m M errill Lynch. • • 15 C E O s Assess B a n k in g P ic tu re fo r ' Competition Is Primary Issue Facing Banks in New Year Legislative Reforms Needed To Enable Banks to Compete at a pace that likely will cause banks to bility in a changing competitive en lose additional market share. Fun vironm ent. Nonbank com petitors damental also is that all institutions have seized on their lack of regulation By Jam es D. Berry participating in the financial-services to the fullest extent and have been industry be subject to the same admin effective at using this advantage to istrative and regulatory rules so as to address the needs of the marketplace. provide a “level playing field.” Because it is not just an economic O PLACE the extent of nonbank The Depository Institutions Dereg issue, but a significant national politi com petition in the financial- ulation C om m ittee (D ID C ) at the cal issue, the complete reform of bank services industry in perspective, recall federal level potentially is one mech ing and saving-and-loan legislation and that in 1946 com m ercial banks anism for progressive change in the regulation has been avoided. The accounted for 57% of the country’s industry. In the near term, the D IDC approach to date is analogous to treat financial assets; in 1980, commercial could be effective by granting banks ing the symptoms of an illness rather banks market share declined to ap permission to offer depository instru than prescribing and administering a proximately 38%, and it continues to ments competitive with those of other cure. In an attempt to respond to the shrink. financial institutions. This need is unregulated competitors, a few new Money-market funds, credit-card greatest in the short-term financial services have been authorized. The issuers, such as Sears and American market where we are not allowed to success of these programs for the most Express, and commercial-paper is pay competitive rates for deposits of part has been limited and less than suers are just a few of our nonbank less than $10,000, which causes our dramatic. NOW accounts drew some competitors operating on a national attention, but were hard pressed to (C ontinued on page 18) scale without reserve requirements, compete with money-market-mutual similar interest-rate limitations, capi funds, which have paid more than tal-adequacy restrictio n s and the three times the rate authorized for myriad other constraints under which Piecemeal Response to Change NOWs. The NOW account effectively commercial banks operate. In addi raised the cost of funds and did not tion, large bank holding companies No Longer Affordable to Banks serve as a new source of funds. As the By Jordan L. Haines achieved interstate expansion through aggregate totals for money-market acquisition of consumer finance, mort funds climb past the $ 170-billion level, gage, leasing and factoring companies. it s obvious that more of the market is For exam ple, while the dom estic ANY BANKERS cling dearly to being captured by unregulated com branches of Bank of America are lim the idea they are competing petitors. ited to California, BankAmerica’s con today within the confines of something The all-savers certificate was billed sumer-finance subsidiaries operate narrowly defined as the banking indus by some as the instrument that would throughout the nation. The key point try. Such a perspective is naive, how bring attention and balances back to is that nationwide banking is, in fact, a ever, as a much larger competitive are banks and thrifts. Overall, the re reality throughout the U. S. na has developed, namely, the finan sponse to the all-savers certificate has In an era of deregulation of the cial-services industry. No longer can been less than expected by many with financial-services industry, there are banks make decisions and develop in the industry. There has yet to be a several key legislative and regulatory strategies without considering the ac clear indication of the reasons, but reforms needed to enable banks to tivities of the swelling throng of com possibly it results from the numerous compete equally with other financial- petitors within this larger industry. other tax-exempt or tax-deferral pro service providers. One is the ability to Protective regulations and legislation grams available from unregulated pay market rates on deposits that pre that enhanced banking’s growth and competitors. sumably will come about by 1986 as a stability ironically now have become Another specific program autho result of the Omnibus Bill — but only the factors limiting its growth and sta- rized to provide the banking industry more latitude to respond to unreg Mr. Berry is chairman, Republic o f Texas Mr. Haines is president, Fourth National, ulated competition was the new 18Corp., Dallas. Wichita. (C ontinued on page 18) 16 MID-CONTINENT BANKER for January, 1 9 8 2 T https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis M er rates and are conveniently located centered around them, and in fact, many railroads are struggling for sur near workers. W e all know about Merrill Lynch’s vival. By N at S. Rogers Twenty years ago, most bankers CMA account. And money-market funds are snowballing in size. Insur probably considered their competition ance companies likewise are getting to be the other banks in town. A few into the act with IRA and Keogh astute ones probably included a sav OU don’t have to be a Cassandra accounts. And something called “Uni ings and loan or two. Unfortunately, to foresee many of the banking versal Life” with money-market rates far too many bankers still think this is being advertised daily in the W all way — we’re in the banking business, changes that will take place in the next period. few years. That’s because, in large Street Jo u rn al. The Financial Institutions Dereg And now there’s the new American measure, they will be determined by E xp ress-Sh earson com bine and ulation and Monetary Control Act of directions already set. In this regard, I’m a gradualist. Sel Bache-Prudential coming at us. And 1980 forced many bank administrators dom has the banking industry faced our customers also are turning to col out of their tunnel vision. Savings and important changes in the operating en lectibles — antique cars, porcelains — loans received wider powers and much was written about the fading of differ vironment without considerable ad you name it. ences between banks and S&Ls. Most Geographic boundaries will fall from vance warning. And I don’t think it’s within the industry. Both domestic bankers then m agnanim ously ex likely to in the future, either. Not that the industry five or 10 years and foreign banks will be expanding panded their competitive boundaries to include S&Ls and, yes, even credit hence won’t be different from what it is (C ontinued on page 68) unions. today. It will be. But the process will All was safe again and we could get be evolutionary. back to playing our games with rates What changes can we foresee? and premiums with the bank across the F irst, th ere will be m ore and Public Defines Competition; street and, of course, the S&L farther tougher competition — not only from Bankers Must Pay Attention down the street. We even worried regulated institutions, but from the By D. Eugene Fortson about significant con cern s like market at large. Certainly today, we’re statewide and interstate banking and more aware of who our competition deregulation within our financial in really is. W herever you look, you 11 see E AS BANKERS cannot decide dustry. out-of-state and foreign banks moving Our expanded vision was reassur who our competition is. Even in. Houston has 20 Edge Act corpora ing. And we were being eaten alive. our regulators don’t define competi tions and 53 foreign banks — at last tion for us. Admittedly, deregulation Like it or not, our competition has be count. Thrifts are offering NOW accounts, helps expand competition while cur come almost unlimited. As Citibank of credit cards, installment loans — and rent regulation makes it difficult to New York City so urgently reports: • Merrill Lynch with all its mon they can branch where many banks compete. But ultimately the customer ey funds equals the country’s ninth decides the competition question. The can’t. Richard Pratt, chairman of the Federal Home Loan Bank Board, has customer tells us who our competition largest bank in size; • Six of the 10 largest California asked Congress to authorize S&Ls to is and in what arenas we had better be offer many other commercial services competing. If we don’t pay attention, banks are foreign-owned; • Greyhound Corp. (of bus fame) — to be banks in everything but name. we’ll end up like the railroads who leases computers and equipment, sells thought they were in the railroad busi Of course, he wants to preserve all tax, ness instead of in the transportation insurance, insures mortgages and resei-ve and Reg Q advantages. F in an ce com panies are getting business. Of course, railroads are still owns an investment company. • American Express last year pur ATMs. Credit unions are paying high- with us, but our economy is no longer chased Shear son, the second-largest Mr. Fortson is president, Worthen Bank, securities firm in the U. S., operates Mr. Rogers is chairman, First City Nation its own insurance company and owns Little Rock. al, Houston. Adequate Advance Warning Preceeds Banking Changes Y W MID-CONTINENT BANKER for January, 1 9 8 2 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 17 and operates a big bank overseas. James D. Berry Honored • Reuters, the international wire service, has established a globalJames D. Berry, ch., Republic of trading marketplace by placing video Texas Corp., Dallas, was one of eight screens in 4,000 banks and foreignOklahomans inducted into the Okla homa Hall of Fame November 16. exchange locations, thereby giving During an Oklahoma City ban Reuters the capability to bypass finan quet, sponsored by the Oklahoma cial intermediaries by matching bid Heritage Association, about 1,500 and asked prices. witnessed the ceremony. John Con• General Electric has a large in nally, former Texas governor, made dustrial loan company that offers com the introduction and citation, and mercial and residential real estate Mr. Berry’s induction was carried loans, equipment leasing and passbook out by Oklahoma Governor George thrift accounts. Nigh. Mr. Berry, a native of Sapulpa, • Sears, our newest competitor on Okla., is CEO of one of the 25 largest the block, is the largest U. S. S&L financial institutions in the U. S. He holding company, the owner of a major also has served three years on the insurance company and now the proud 12-member Federal Reserve Bank parent of the fifth largest stock broker advisory council. age and the largest real-estate broker. The custom er knows something good when he sees it, and that’s where 10%-rate differential between NOW he puts his money. Unfortunately, accounts and money-market funds is much of that money is coming out of too high a premium for the conveni our banks. Only by watching our cus ence of a NOW account. Competition tomers, anticipating their needs and for NOW accounts has been strong defining our com petition in the with some institutions “buying market broadest terms can we stay on target in share” by pricing services below cost. designing our products and develop The all-savers certificate may prove ing the delivery systems that meet to be the least effective of the new those needs. It’s also the only way we deposit instruments. While the all will stay in business. • • savers certificate was expected to ben efit thrift institutions, early returns on Berry this product indicate acceptance far below many people’s expectations. (C ontinued fr o m p age 16) All-savers is a complicated, one-year customers to seek more attractive in instrument with no means of “auto vestment returns from nonbank, non m atic” renewal. Should Congress insured institutions. allow this instrument to be retained While these are changes we are an beyond its Decem ber, 1982, cutoff ticipating in the future, let me com date, the effectiveness of the instru ment on the effectiveness of three new ment as a long-term-funding source depository instruments, starting with would be enhanced with automatic re the individual retirem ent account newal. (IRA). The strength of this instrument A final issue of importance is the is due to the combined effects of ex potential consolidation of thrift institu panded eligibility for IRAs to people tions. These institutions have been already covered by pension plans and severely impacted in an era of inflation permission for an 18-month maturity from rate-sensitive liabilities that instrument with no interest-rate ceil generally fund fixed-rate assets and ing. Through the IRA, we have the from disintermediation caused by the opportunity to offer a competitive de advent of money-market funds and posit instrument that should provide a other competitive instruments. Ex stable, long-term source of funds. It is pansion of thrift powers will not afford our intention to offer this product immediate relief from their earnings through a systematic savings system, and capital problems, and merger with possibly through a payroll-savings strong commercial-banking or non plan, in addition to the lump-sum con banking organizations could prove tribution that was the norm under the necessary. old law. Considering the wide range of issues We favor paying market rates on we have reviewed, it is obvious the consumer deposits, and we were dis banking business is in a fast-changing appointed recently at not being per era. Republic of Texas fully accepts the mitted to raise our savings-account challenges presented by deregulation, rates. Although NOW accounts allow and we have every expectation of con us to pay 5.25% interest on our cus tinuing to be a high-performing in tomers’ demand deposits, this is not a stitution for our customers and stock competitive instrument because the holders. • • 18 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Haines (C ontinued fr o m page 16) month d eregulated individualretirement-account (IRA) time instru ment. It is questionable whether the industry can adapt itself to a dereg ulated mode quickly enough to com pete against brokerage firms and insur ance companies for the vast market that opened up January 1, 1982. This unregulated group of com petitors merely has to aim its existing arsenal at a new target. The issue of deregulation is complex and does not lend its e lf to easy answers. There are reasonable and well-founded concerns about banking moving into a deregulated environ ment. Such an environment will place substantial demands on the manage m ent of banks, regardless of size. Additionally, it will create new sets of problems for the various supervisory authorities. Understandably, dereg ulation is viewed with apprehension by the banking industry, but the altern ativ e is unth in kable. That alternative is to allow the banking in dustry s position to erode further as more competitors offer more services to the market while banking’s hands remain tied. The alert nonbank com petitors are not courting customers to sell a single-service offering, but in stead are positioning themselves to se cure total financial relationships of these customers. While some in the banking and thrift industries have been lobbying to preserve an anti quated regulatory system , unreg ulated competitors continue to de velop services and territories. The lesson we should have learned from what is continuing to happen in the marketplace is that we cannot afford to piecemeal our response to the competition. Hastily conceived pro grams that are reaction to the aggres sive unregulated competition not only fail to provide the competitive re sponse needed, but because they are not well planned, their lack of success is damaging the image of banks as a whole. Bankers must be provided the opportunity to plan and innovate on a con sisten t, ongoing basis. Proper mechanisms to protect the public, while meeting the needs of customers, will have to be integrated into the guidelines for the whole financialservices industry. A regulatory en vironment must be created that will allow banks to compete. Those that have the resources, capacity or desire, (C ontinued on page 70) MID-CONTINENT BANKER for January, 1 9 8 2 Surefire wire. M oney management. It’s a m atter of transferring the right amount to the right account at the right time. It’s one ----------of the things we do best at Commerce Bank. The money management specialists at Commerce deal _________________ in a large volume of transfers averaging about one bMon dollars a day. We have handled as many as one thousand transfers in a single day. In a business where mil lions of dollars change hands , ______ _________ each hour, you can’t afford a bank that makes mistakes. In som e cases we’ll follow a wire transfer up with a phone mm m mm ;mm call to make sure that funds mm have been deposited to the © I m proper account. And, if there '181 is » is a problem, it is resolved 111; » .........! quickly, usually within the same business day. Fast, accurate service from friendly professionals. wethinkit’sthe surefire way to keep our correspondents happy. MID-CONTINENT BANKER for January, 1 9 8 2 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis # Commerce Bank r Y Z of Kansas City NA MEMBER FDIC (816) 234-2000 • 10th & Walnut • Kansas City, MO 64141 19 Forecasting C&l Loans in 1982: An 'Iffy' Proposition for Bankers By John D. Mangels, President, Robert Morris Associates N TH E PAST, the task of providing a reasonably accurate forecast of commercial and industrial (C&I) loans for the banking system has been rel John D. Mangels has atively easy when compared to some of been with the $5.9the more unstable indicators of our billion-asset Rainier business. Now, even that forecast has Nat'l, Seattle, since joined the ranks of strongly qualified 1950 and has been its president since predictions that must be preceded by 1976. the word “i f ’ reiterated a number of times. For example, tax legislation enacted earlier this year constitutes a radical change in treatment of corporate de preciation and other incentives so that paper and bankers acceptances has cash-flow projections may be altered grown so huge in recent years, and so considerably. Obviously/this has im many new entrants are using this form plications for business borrowing from of financing, it’s a problem to know banks, as does the prospect of a sub how to divide up 1982’s total estimated stantially more attractive leasing out demand for short-term credit between look, particularly for those companies bank loans and these other instru only marginally profitable. One esti ments. mate indicates that next year, depre And, finally, complicating the abil ciation changes alone will add $20.7 ity to forecast is the highly ambiguous billion to nonfinancial cash flows, in percentage of such loans being granted contrast to only $3.6 billion in 1981. by nonbank subsidiaries of bank hold Another i f factor is the present ing companies. There certainly is level of interest rates. Although rates much financing being made available have come down appreciably from his to business that does not come through toric highs in recent months, as of this the orthodox channels of a loan made writing in December, they still repre directly from a bank. sent an abnormal margin over the cur As a starting point in looking at 1982, rent inflation rate. We probably are we need first to estimate the 1981 witnessing right now the usual cyclical volume of C&I loans for all commercial process of corporations funding out of banks. One could just use business short-term debt (bank loans and com loans of the weekly reporting banks as mercial paper) into medium- and long a proxy for the whole system. Through term bonds. Cost of financing these November, 1981, such loans had been instruments (and mortgages), howev increasing at a 9.3% annual rate. er, still is relatively expensive com However, we at Rainier tend to think pared to “under-prime” lending rates; money-center banks are receiving a thus, volume of such debt-maturity greater proportion of C&I loans than sw itching rem ains u n certain . I f many of the medium and smaller-size November, 1981 ($7 billion), consti institutions around the country and tuted a guide, many bank loans will be that the increase is misleading. A more paid off from this source in coming likely range is somewhere between IV2 months. and 9%. Using average-for-the-year Third, the market for commercial figures, this means such loans will be I 20 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis up someplace between $23 billion and $27 billion (or, going year-over-year from December, around $32 billion). We tend to be a bit conservative, be lieving that C&I loans will have shown a definite tapering off in the fourth quarter of 1981 after a surge in the second and third quarters, and that we 11 end up at around a 7% gain. As we move into our estimate for 1982, we are working from an eco nomic outlook that forecasts little or no growth for the first three months and then a rather modest increase in the second quarter of 1982. It doesn’t appear the economy is going to pick up steam until the last half of the year. Our interest-rate scenario indicates that both mortgage rates and long term bond yields will be conducive to a much larger volume of corporate and personal borrowing as we move into the third quarter. This quite possibly could give a significant boost to ail forms of commercial-bank lending not including the business category. But, candidly, what we don t know how to assess in regard to that period is how personal tax cuts are going to be handled by individuals in either reduc ing outstanding debt or adding to var ious types of savings accounts. Other and newer forms of savings such as individual retirement accounts (IRAs) and all-savers certificates could add considerably more funds, alleviating pressure on interest rates even if banks experience higher loan volumes. What this all adds up to, all quali fiers considered, is that this form of business credit should increase much more slowly than it did during the second and third quarters of 1981. Our projected range for 1982 is between 5V2 and 8V2% growth, with a “bestguess” estimate of around 61/2%, with individual banks more or less depend ing on their aggressiveness and indi- MID-CONTINENT BANKER for January, 1 9 8 2 EVEN IFACUSTOMERLOSES ALL HIS IDENTIFICATION, WECAN HELPHIMSAVE FACE. *i*'**' American Express can give your customer a temporary ID. Anyone who loses a wallet on vacation has probably lost more than just money. Chances are, he’s lost his identification too. W h ich means he may have trouble trying to prove who he is when he tries to cash a check. Pick up his rental car. O r check into his hotel. Fortunately, American Express can help. If your customers lose their identification along with their American Express® Travelers Cheques, we can issue them a temporary ID. W h en they call to report their loss, they will be referred (following verification) to one of our Travel Service Offices in the U .S ., Canada, Puerto Rico, or the U .S . Virgin Islands-where they can pick up the ID card during business hours. It has our name and phone number and their name printed right on it, so they can use us as a reference wherever they go. N o other travelers cheque can give your customers a temporary ID card. And no other travelers cheque offers all the other special services we do throughout the U .S ., Canada, Puerto R ico and the U .S . Virgin Islands: 24'H our Travel Service Hotline, Credit Card Cancellation Assistance, Emergency Message Service and C heck Cashing up to $200. So when you sell your customers American Express Travelers Cheques, you’re giving them the kind of extra protection they may need on their next vacation. And the more you do for them, the more you do for yourself. After all, keeping your customers satisfied is the best way to keep your customers. Am erican Express Travelers Cheques https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis American Express Travelers Cheques, Am erican Express Plaza, New York, N.Y. 10004 212-323-3226 vidual pricing strategies. Such a per centage growth is just slightly less than the anticipated underlying rate of in flation in 1982, so that the real volume of such loans would probably decline modestly. It goes without saying there will not be an even quarter-by-quarter pattern developing over the year. We see most of the growth coming in the last six months of the year, quite possibly hit ting an annualized growth rate of 10% in the last quarter. In conclusion, let me say, lest you think we are chagrined at all the vari ables and the increasing difficulty in What Will Be Effect on Savings Of Economic Recovery Tax Act? ITH the approach of a new savings — a result, he says, that hardly year, ed itors of M i d - C on surprised anyone. Perhaps the biggest tinent B anker asked two economists surprise, according to Mr. Peterson, what they foresee for 1982, partic was how few certificates were sold and ularly as a result of passage of the how much of the funds went into com Economy Recovery Tax Act of 1981 mercial banks rather than into thrift (ERTA). What will be its effect on institutions, the legislation’s biggest Americans in general and on banking proponents. in particular? H ere are their com ments: "Tax advantages of the new ERTA’s main thrust, says Jan ies A . Byrd, econom ist, First In tern ation al individual retirement accounts Bancshares, Dallas, should be to in (IRAs) to income earners in vir crease business investment in new tually all tax brackets could plant and equipment and other facili ties. To the extent this new investment have a dramatic impact on new increases productivity, says Dr. Byrd, savings." we will be better off. However, he adds, because of construction times On the other hand, he points out, that are to be involved, effects of this tax advantages of the new individual new investm ent will take time — retirement accounts (IRAs) to income several years, in fact. earners in virtually all tax brackets Even so, he believes, 'the im por could have a dramatic impact on new tant effect of the Tax Act is to reduce savings. Some estimates are that as the federal government’s share and to much as $50 billion will go into these increase the private sector’s share of accounts this year, making them a the economy in the future from what greater contributor to savings than the they otherwise would have been. Any less-than-$30 billion that has gone into downward interest-rate effects will be the all-savers certificates. Also, he bonuses.” says, because the amount deducted D r. Byrd also points out that a casual from 1982 income need not be in look at history shows clearly that vested until April 14, 1983, some indi there s only a loose linkage, at best, viduals may want to delay opening an between interest-rate movements and IRA until that time. Nevertheless, says interest-rate levels on the one hand Mr. Peterson, these funds are more and savings rate of individuals and likely to represent new net savings that businesses on the other. Even in re will grow each year. cent years while interest rates were “More difficult to assess is how indi moving upward (in some cases sharp viduals will use ben efits accrued ly), he continues, the savings rate con through tax deductions — whether tinued to decline or to remain low. It they will spend or save,” he stated. still is. “ U ndoubtedly, some of both will R ich a rd S . P eterson , sen io r vice occur. However, current broadened p r e s id e n t /e c o n o m is t , C o n tin e n ta l investment opportunities at marketB ank, C h icag o, believes that while interest rates and further reductions in there s little doubt that incentives the inflation rate should provide an en built into ERTA will increase savings vironment conducive to increased sav more than what normally would have ings. occurred, not all facets of the legisla Effects of the Tax Act on business tion will have equal impact. He cites as are more complex. Certainly, the cur an example the all-savers certificates, rent depressed state of economic activ which did little to increase net new ity and high levels of unused resources W 22 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis forecasting virtually anything, that nothing could be further from the truth. These are extremely exciting times for bankers. Uncertainty has a way of stimulating innovation and competition, from which our custom ers benefit. And the best and the bold est will be the most profitable. • • are likely to overpower the stimulative effects of the tax cuts on short-run busi ness investment. At the same time, however, the tax benefits will improve internal corporate cash flows. Once the economy recovers, the climate for renewed investment and consequent gains in productivity should be greatly improved.” • • Controlling Labor Costs Part of Inflation Battle, Continental Economist Says A continuing slowdown in business activity has substantially reduced the rate of increase in inflation, but lasting benefits will come only through a fur ther reduction in cost pressu res, according to Robert F. Dieli, indus trial economist at Continental Illinois National, Chicago. W riting in the bank’s econom ic newsletter, Mr. Dieli said, “Labor costs have been a contributor to the inflation rate. And still open to ques tion is the outcome of pending major bargaining agreements that could lead to more stable price patterns in the future.” He noted that the present situation in labor costs is, in part, due to the combination of lagging wages and the heavy collective-bargaining schedule in 1979, which produced large settle ments and m ultiple-year contracts with liberal cost-of-living adjustments. While the present low levels of em ployment, capacity utilization and corporate profits would be enough to produce very different contract settle ments from those of 1979,” he said, “major structural changes in industries like auto, steel, airline, railroad and trucking also will have a significant effect on bargaining positions.” Mr. Dieli added that negotiations, specifically in the auto, trucking and airline industries, this year will likely take into consideration factors such as job security and profit sharing in addi tion to wage-and-hour concerns. Smaller wage increases and a con scious effort to increase productivity, both through negotiated changes in work rates and the introduction of new equipment, eventually will lead to lower unit-labor costs,” he said. MID-CONTINENT BANKER for January, 1 9 8 2 Reduce Your Loss Ratio Skip Tracing Procedural Manual Have a problem locating debtors? Are you dependent on collection agencies? Many professionals are plagued with this problem. Your in-house personnel could reduce this expense by 60-70% if they are properly trained. Credit Seminars, Inc., offers this Manual to you. “MANUAL HI-LITES” • Updated concepts enabling you to determine the most effective course of action on locating each skip. • Provide you with ways to evaluate pertinent information. • Creative ideas on using the telephone to increase your information gathering skills. • New techniques on how to prepare correspondence for increased deliverability. • Proven procedures for achieving maximum collection results. • Review of laws and regulations affecting tracing and collection practices. S e n d $ 6 5 .0 0 to — Credit Seminars, Inc. 1 6 6 0 0 Sp rag u e Rd., Su ite 4 0 C leveland, Ohio 4 4 1 3 0 MID-CONTINENT BANKER for January, 1 9 8 2 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Q U A N TITY D ISC O U N T A VA ILA BLE ^ C A L L (216) 2 4 3 - 2 4 0 0 23 Com petitive Effects of Change C an Benefit Com m unity Banks — not the competition — if we fail to survive. Small banks’ decision-making for the future can be simplified into a few do’s and don’ts. Do keep a cool head as competition intensifies. That means we don’t sell out to the first buyer who kindly offers to relieve us of the supposed burdens of guiding our banks through these challenging times. There are many reasons for owners to want to sell a bank, but I have never understood Mr. Bolger is president, McHenry (III.) how one of these reasons can be the State. He is a past president, Independent com m only heard com plaint that Bankers Association o f America, and cur rently is treasurer, Illinois Bankers Asso banking ju st isn’t fun anymore. ciation. Change brings small banks more than just headaches; it brings new opportu nities for business, new roles in com munity leadership and all the other MALL commercial banks will be special joys and challenges that make facing many turning points as de operating a community bank so satis cisions are made to deal with increased fying. competition for banking business, but D o respond to competitive chal there is really only one basic decision lenges with your bank’s scale in mind. that counts: Will I greet the new com We do not have to become Sears to petitive challenges by throwing my compete with Sears’ financial services. hands in the air and moaning about the We can pick and choose among com good old days, or will I recognize my petitive innovations as they develop, strengths as a community bank and re while maintaining the strong commu spond creatively and positively as each nity identification that always has been new challenge arises? our trump. That does not mean that The future has many changes in small banks can sit back and wait out store; we cannot operate a bank today the competitive challenges as if they as we did 20 years ago — or as we did were some storm that will blow over. yesterday, for that matter. But that But we should determine our hard does not mean that community bank ware and services based on what our ing itself has suddenly become old- customers actually need and desire fashioned or out of date. Regulatory and not feel pressured to respond in agencies report that applications to kind to every move a com petitor charter new community banks are makes. arriving at a record pace, and it’s no D on’t permit frustration with short wonder. A recent Federal Reserve term problems determine long-term study showed that since 1977, in spite decisions — you’ll just end up with of intense competition and erratic eco long-term problems. A good example nomic conditions, small banks not only is deposit instruments. The Deposi had a higher growth rate and return on tory Institutions Deregulation Com assets than bigger banks, but their per mittee (DIDC) has mismanaged its job formance improved steadily. If we let of deregulating interest rates so badly ourselves get talked into believing — and unregulated money-marketgloom-and-doom speculations about mutual funds have grown so rapidly — small banks’ future, rather than believ that some bankers are ready to give up ing the proved record of small banks’ on rate ceilings right now just to be high performance and profitability, done with it. But interest-rate ceilings then we have only ourselves to blame (C ontinued on page 44) É S 24 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Mr. Mainous is president, Citizens Union National, Lexington, Ky., which he joined in 1958. He currently is treasurer, Inde pendent Bankers Association o f America. C HANGE is inevitable and a con tinuous process. How we mold and direct change for the betterment of man is each person’s individual re sponsibility. Let’s look at some of the specific trends of change and their competitive effects. C om m u n ity -D ep ository In term e d ia r ie s . In d ep en d en t com m unity banks have served as communitydevelopm en t-depository in term e diaries, placing the basic needs of the community they serve as a first priority for use of their depository funds. Ex cess funds not needed locally have been used within the state and in the national economy. Local banking cus tomers have benefited through re investment of local funds by having local costs for all banking services, whether they be fees or rates charged on credit. The trend today is to subject all depository funds to money centerdictated, international money-market rates, thereby removing allocation and pricing options from local commercial banks. Increasingly, they must seek money-center rates or investments to pay savers and certificate-of-deposit investors the money-market rate. This factor and the nonbanking competition allowed for bank deposits are produc ing a flow of funds from local communi ties to money centers, and this is inten- MID-CONTINENT BANKER for January, 1 9 8 2 sifying daily. Continuation of interestrate deregulation and addition of pro posed vehicles, such as bank moneymarket mutual funds, serve to greatly accelerate this trend and further re duce availability of funds that may be used at the local level. Community banks, it appears, are no longer to serve prim arily as com m unitydevelopm en t-d epository in term e diaries, but will becom e m oneymarket in term ed iaries. These de velopments increase the cost of all bank services and place smaller, local customers at a competitive disadvan tage with multinational giants. C redit f o r C om m unity-Bank Cus to m ers. Availability of credit, cost of credit and fluctuations in interest-rate markets are serious matters to indi viduals living on salaries or other fixed income and to small businesses. In addition, as banks are required to maintain an increasing percentage of their deposits in short-term, moneymarket-interest investments, they no longer will be able to continue to satis fy long-term borrowing needs of farm ers, small businesses or home owners. I have yet to see any competitive alternative that is reasonable and affordable that will meet these needs. Movement of funds from local com munities into money-market centers is a major concern to community banks because their financial vitality and, in fact, survival are dependent on the economic health of the local commu nity. This does not appear to be a tem porary situation, as there is a world wide shortage of capital, and foreign markets undoubtedly will bid whatev er price is necessary to attract capital from the U. S. C om m ercial Banks/M onetary Poli cy. Until recent years, the Fed de pended prim arily on com m ercial bankers to implement monetary policy in a constructive manner. During re cessionary periods, additional reserves would be made available in the bank ing system and bankers would be en couraged to develop business opportu nities in their areas. During inflation ary periods, when the economy was beginning to show speculative tenden cies, commercial bankers had a re sponsibility to allocate a reducing amount of credit to their customers who would be most productive or that would serve basic needs of customers in their area. Particular responsibility was directed to rejecting credit ap plications for speculative projects which, along with increases in cost of credit, would cause a reduction in eco nomic activity and a cooling of the eco nomic business cycle. This system is not effective today for two reasons: First, emphasis on competing for deposits at maximum national moneymarket rates brings bankers under pressure to lend to speculative proj ects willing to pay the highest borrow ing rate. Interest-rate deregulation will escalate this factor. Second, regulatory authorities have allowed unregulated competition to compete directly for banking deposits and thereby remove these funds from the direct influence of monetary poli cy. This is unfair competition and amounts to a government monopoly. I view both of these situations with concern, as they are affecting the sta b ility of the banking system and growth potential of smaller customers as well as the cost and availability of funds for basic community financial needs. F e d e r a l F isca l P olicy. Excessive federal-spending deficits monetized through the banking system since the Vietnam War have had a devastating effect on our country and every phase of economic life. This is the epitome of unfair competition for funds by gov ernment through an inflation tax. I see little hope for financial stability until this root cause of universal inflation is 19 8 2 PROGRAM S The Assemblies for Bank Directors Sponsored by The Foundation of the Southwestern Graduate School of Banking Southern Methodist University Dallas, Texas ESTABLISHED PROGRAMS designed to provide continuing education and in formation on current issues in banking for both inside and outside direc tors. NEW SENIOR BANK MANAGEMENT SEMINAR, a participatory conference for bank officers at the level of executive vice president and above. Limited to 50 officers and their spouses. CHALLENGING AND STIMULATING MEETINGS held in prime locations. OUTSTANDING SPEAKERS, including bankers, regulators, and educators. January 28-31 48th Assembly, Canyon Hotel Racquet and Golf Resort, Palm Springs, California February 28-March 4 Senior Bank Management Seminar, at the new Sheraton Royal Waikoloa Hotel on the Big Island of Hawaii March 4-7 49th Assembly, Wailea Beach Hotel, Maui, Hawaii September 4-7 50th Assembly, The Broadmoor, Colorado Springs, Colorado October 28-31 51st Assembly, The Homestead, Hot Springs, Virginia F or further information send form below to: Dr. Alan B. Coleman, President, Southwestern Graduate School o f Banking Foundation, Southern Methodist Uni versity, Box 214, Dallas, Texas 75275 — or telephone 214/691-5398. Name ----------------------------------------------------------------------------- T itle -------------Bank or Business --------------------------------- ------------------------ -------------------------Address --------------------------------------------- C ity ------------------State------------ Zip Please send information on: ( ) Senior Bank Management Seminar ( ) Assemblies for Bank Directors 48th ( ) 49th ( ) 50th ( ) 51st ( ) MID-CONTINENT BANKER for January, 1 9 8 2 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 25 brought under control. The natural ne cessity of every phase of business and political life to adjust and attempt to offset unsustainable inflation simply is the product of the basic problem. It would appear that there are those who are taking advantage of this situation and view it as an opportunity to bring about changes to the basic financial system that would be of specific ben efit to their vested interests. D eregulation, originally supported as finally turning off the salt machine of costly, unnecessary regulation, sud- "• . . Regulatory authorities have allowed unregulated competition to compete direct ly for banking deposits and thereby remove these funds from the direct influence of monetary policy. This is unfair competition and amounts to a government m onopoly/7 denly was redefined as dismantling the existing banking system. Deregulation of interest rates seems to eliminate competitive options of borrowers or in vestors to do business with a moneycenter financial-services institution at “prime-rate” prices o r with a local bank at ‘local” prices. All institutions obtaining deposits at money-market rates will have to charge moneymarket borrowing rates to maintain a positive spread. Banking is a quasigovernm ental service industry on which the public expects and needs stability and, th erefo re, requ ires reasonable regulation. Savings — Investm ent — Specula tion. In recent years, there has been a reassessment of the basic concepts of savings and investment. Savers tradi tionally have been defined as those who had a primary interest in safety of their principal an d safety of their in terest, even though they may not be obtaining the highest yield available in the investment market. Investors are those on a scale from very conservative up through speculative to outright gambling who are willing to assume relatively higher risks for their princi pal and/or interest income in order to have the potential for earning a higher yield on their investment or high capi tal gains. Most bank savers do not in tend for their funds to be converted to an investment category that assumes a higher risk. The federal government, through depository insurance programs, is, in 26 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis effect, assuming a higher risk against its insurance funds by encouraging banks to pay investment-market yields on savings, and, in turn, seek to earn investment-market yields from their borrowing customers or other earning assets. It appears to me that the brokerage industry has encouraged a redefinition of “saver” to “small inves tor” to obtain a direct access to these deposits with, of course, a fee for their service, but without banking’s com munity responsibility, as reflected by the Community Reinvestment Act. M oney-market mutual funds are a prime example of this approach and also serve as an example of how com m unity-reinvestm ent funds are di verted to money-market centers and out of the local allocation process of monetary policy through community banks. This trend definitely is increas ing, and even many small bankers across the country now are calling for money-market-mutual-fund powers within the bank in order to “compete. ” The question is, will their borrowing customers and consumers they serve be able to “compete” with the attend ant higher prices and market fluctua tions? B an ker — Financial Services C om p etition . Many community bankers have been trained and conditioned to view their professional services as a “fiduciary” relationship. They may find it difficult to adjust their thinking in order to effectively compete in the market, in the short run, with some one who may be thinking, “let the buyer beware. ” The prospect of preda tory, high-risk competition could be disruptive to a stable banking system. For most commercial banks, howev er, enough flexibility has been main tained to pass along money-market risks to their borrowing customers. Over the past year or so, borrowing rates have been at unsustainable levels, bringing the possibility of a sub stantial increase in defalcations of small businesses, which would pass the risk back to commercial banks, many of whom would then find them selves in a distressed situation. It’s easy to proclaim that borrowing cus tomers should pay the “going rate.” Many community bankers have been trained and con ditioned to view their profes sional service as a "fiduciary77 relationship. They may find it difficult to adjust their thinking to effectively compete in the m arket. . . with someone who may be thinking, "Let the buyer beware." However, the danger of a general eco nomic crisis brought about by an un sustainable cost of credit priced to be competitive with foreign markets or extreme volatility needs to be consid ered carefully. A money-market risk could become a political risk. A politi cal risk may involve personal freedom. D iversification o f O w nership!C on trol. The current trend is for fewer, but much larger, financial-service in stitutions. This will have a tendency to displace and concentrate, not only M oney-M arket Risks. As commer ownership and control but, important cial banks assume the obligation to pay ly, economic and political power in the money-market rates on their deposits, hands of a few. In addition, there is a they must, in turn, seek money- serious question as to whether com market rates from their borrowing cus petition is increased or, in fact, de tomers and other investments with a creased by drastically reducing the positive-yield spread. This trend cur number of independently managed rently is a fact of life, and great em financial institutions. phasis is being placed on new ideas, Regulatory A u thorities. There is a methods and technology to deal with strong trend to consolidate regulatory yield-spread management. As we be authorities governing financial institu come more “deregulated” and yield- tions. However, it’s difficult to recon oriented to fluctuating international cile this trend with lack of control over money markets, banks will, of necessi nonregulated businesses competing ty, need to convert their loans to vari directly for bank deposits. Deregula able rates. This has proved to be an tion of interest rates and deregulation overwhelming problem for some in of specialized functions of financial in stitutions that have, ironically, pro stitutions viewed together, however, vided exemplary service under their would tend to explain this, but Con charters by making long-term home- gress must pass specific laws in order ownership loans or long-term loans to to confirm and ratify this trend. Once family farmers, only to have their de again, a question is raised as to the posit base converted to high, short level of competition that would exist term obligations with a negative yield after deregulation, where there are a spread. (C ontinued on page 45) MID-CONTINENT BANKER for January, 1 9 8 2 THE CHANGING PICTURE OF BANK SECURITY IN THE ’80’s. Bank Administration Institute’s Conference on Bank Security March 14—17, 1982—Kansas City Missouri Be sure to attend the nation’s foremost security conference where the rapid changes taking place in today’s banking will be discussed by some of the country’s leading experts and professionals. Since 1969, this has been the largest meeting of bank security professionals in the world. r For inform ation, call D ebra M artin, C onference A s s ista n t at 3 1 2 -2 2 8 -6 2 0 0 or toll-free 8 0 0 -3 2 3 -8 5 5 2 Ext. 5 5 9 , (In Illinois, 8 0 0 -9 4 2 -8 8 6 1 ) or write: Keith D. M arshall, Principal Secu rity Specialist Bank A dm inistration Institute 6 0 Gould C enter Rolling Meadows, Illinois 6 0 0 0 8 Please sen d m e a detailed b ro ch u re on B a n k A d m inistration In stitu te ’s C onference on B a n k Security. Nam e T it le O r g a n iz a t io n DANK ADM INISTRATIO N INSTITUTE https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis A d d ress C it y S ta t e Z ip D Banking Is Ripe For Structural Change, Says C h ase Executive ONBANK COM PETITION and structural change in banking were discussed by Thomas G. Labrecque, president, Chase Manhat tan, New York City, at two different meetings late last year. One was the ABA’s annual correspondent bank con ference in Kansas City; the other was the annual fall conference of Robert Morris Associates in New Orleans. Everywhere, said Mr. Labrecque, traditional divisions of the financial structure are crumbling. While others are allowed to enter the traditional banking business, commercial banks continue to be prohibited from enter ing these competitors’ businesses and are precluded from competing in an unrestricted way in their own. Clearly, he continued, the financialservices industry and the banking in dustry in p articu lar are ripe for structural change. The broad policy issue confronting bankers today, he said, isn’t w h eth er change will happen, but w hen and how . Mr. Labrecque believes the answer to when change will take place is soon er than most bankers think, that structural change is close. As to when it will happen, he admitted he does not know, but then outlined the broad areas where he thinks changes are mounting rapidly: “First, in widening banking powers: We want to meet the competition in a broader range of products and ser vices. “Second, change should eliminate geographic barriers: W e should be allowed to compete with Sears and Equitable in their geographic markets. “Third, antitrust regulation, as it affects banks, should be refined: We want to make our system more subject to market forces and to reflect benefits of service networks and economies of scale.” 28 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis W idening Bank P ow er. In terms of com petitive powers, said Mr. La brecque, banks are at a serious dis advantage today. Put simply, he con tinued, they lack the power to com pete with other kinds of financialservice firms by offering consumers a fair and competitive return on their money. In his opinion, banks are sty mied by regulations that impose arbi trary legal ceilings on deposit rates. He illustrated this point by discuss ing money-market funds, which have gone over the $170-billion mark, more than double their assets since the be ginning of 1981. Even introduction of the all-savers account, he went on, has failed to slow significantly the growth in money-market funds. I don t believe bankers should want the money-market funds stopped; we should seek the authority to offer com petitive products and services,” he said. Turning to the wholesale side, he said banks are losing their market posi tions there, too. Nonfinancial com mercial paper, not subject to reserve requirements, has grown to more than $55 billion. Moreover, he said, insur ance companies and investment firms have joined the short-term credit fray to serve corp o ration s’ long-term needs. Banks competing in much the same marketplace must maintain re serve balances at the Fed — a cost, he said, much like a tax, and not one borne by competing corporate lend ers. Mr. Labrecque also listed other areas banks cannot enter: the insur ance business, underwriting munici pal bonds, expanding their trust and fiduciary powers. By contrast, he said, nonbank competitors are allowed to compete in these areas. Again, he emphasized, he does not want to regulate the com petition. Rather, competition must be a two- THOMAS G. LABRECQ U E is with Chase Manhattan Corp. and its principal subsidiary, Chase Manhattan Bank, New York City. At the latter, he became chief operating officer June 25, 1980, and was given the additional title of president last April 21. Mr. Labrecque joined the bank in 1964 as a member of the man agement training program and worked in various groups and held various titles, including vice president/manager of correspondent bank portfolio advisory, before being named executive vice president/treasury department execu tive in 1974. He joined the man agement committee in 1976. He was the Chase representa tive on the team that worked out financial arrangements associated with the release early in 1981 of American hostages from Iran. way street, and the solution is not for banks to rid themselves of the invaders on their turf, but to be allowed to com pete more fully in the market territory. Elim inating G eog rap h ic B a rriers. Again looking at banks’ competitors, he noted that they are everywhere, but banks are restricted geographical ly. Such a restriction, he said, denies the existence of several real factors: 1. Reality of competition from out side a bank’s territory. 2. Reality of national markets. 3. The opportunity consum ers should have to take advantage of more efficient service, lower costs and great(C ontinued on page 62) MID-CONTINENT BANKER for January, 1 9 8 2 The Associates: People who can help keep your commercial customers in your bank. The Associates, with resources over $5 billion, has been a leading source of asset-based financing for over sixty years. Much of our success is due to our close working relationships with banks. Our skilled, experienced, moneyfor-business specialists can help expand your bank’s ability to meet the special needs of your customers — and keep your commercial customer in your bank. A key consideration in today’s competitive banking environment. Perhaps a good customer needs more funds than you can loan. Or, you may choose to limit your employment in a particular loan without jeopardizing the banking relationship. Just two of a variety of ways an Associates’ bank participa tion program can help you and your customers. Our people have the experience and desire to create the best possible program for you and your customers. Get to know The Associates. Contact the regional office near you. A Loan Development Officer will meet with you to discuss your requirements. The Associates: People Worth Knowing. The Associates A Driving Force in American Business A sso c ia te s Com m ercial Corporation B u sin e ss Lo an s 55 E. Monroe Street Chicago, IL 60603 (312) 781-5800 (Call Collect) Business Loans Offices in Atlanta, Boston, Charlotte, Cherry Hill (NJ), Chicago, Dallas, Denver, Detroit, Houston, J_os Angeles, Miami, Nashville, New York, St. Louis, San Francisco, South Bend (IN), Tulsa. Associates Commercial Corporation is a subsidiary of Associates Corporation of North America, a Gulf + Western Company. MID-CONTINENT BANKER for January, 1 9 8 2 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 29 Cutting Budget Deficit Is Vital To Stabilizing the Economy HE STAGNATION that has char acterized the U. S. economy since early 1979 has taken a new turn. Whereas business activity rebounded in mid-1979 and mid-1980 following declines in each year’s second quarter, it has apparently failed to do so in 1981. After falling at an annual rate of 1% to P/2% in the second quarter, the gross national product (GNP) adjusted for inflation fell one half of 1% at annual rates in the third quarter, according to the Com m erce D epartm ent’s esti mates. This negative turn of events has prompted a Presidential declaration of recession. In a statement reminiscent of one that Jimmy Carter made in July, 1979, President Reagan voiced his be lief that the economy has entered into a recession. Like President Carter’s statement, President Reagan’s remark is a most unusual admission from an incumbent Administration. Previous ly, administrations didn’t like to talk about recessions — even after they were officially certified by the umpire of the business cycle, the National Bureau of Economic Research. Many consumers and businessmen in the “real world” believe that the recession got under way in early 1979 — and is still with us. The real GNP is only a touch higher today than it was in first-quarter 1979, while industrial production and the coincident indica tor index are lower. Plainly, we have been experiencing over much of the past three years a definite departure from the business cycles of the past. By Irwin L. Kellner Senior V ice President/ Economist M anufacturers Hanover Trust New York City Since early 1979, the economy has en countered a series of stops and starts, rather than regular, clearly defined ups and downs in economic activity with their usual effects on interest rates, the rate of inflation and so on. Given this new environment, it’s hardly surprising that economists have had great difficulty in forecasting. Tra ditional business cycle analysis no longer offers clues to the longevity of a slump or an expansion. Interest-rate forecasting — a hazardous undertaking under the best of circumstances — has become virtually impossible without clearly defined business cycles, not to mention the advent of the Fed’s new regime of monetarism. The net result is confusion in the money and credit markets, as well as on the part of con sumers, businessmen and policymak ers. T he new en erg y eq u a tio n . What caused this? Why, after decades of reg ular cyclical ups and downs has the economic rhythm changed? The way I see it, three major developments are responsible. The first has its roots back in 1973-74, when the Organization of Petroleum E xp orting C oun tries slapped an embargo on exports of pe troleum to the West and raised oil prices significantly. Although consum To Stabilize the Economy . . . • Tighten fiscal policy to reduce pressure on the money and credit markets. • Postpone the July 1 tax cut and levy a value-added tax. • Limit business tax incentives to firms engaged in energy-saving projects. • Continue the Fed's recent move toward somewhat easier money. • Give first priority to reducing the budget deficit. 30 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis ers and business soon adapted to high er-priced energy by purchasing small er cars, insulating their homes and offices and changing thermostat set tings, their enthusiasm for conserva tion gradually waned as the nominal price of oil held steady in the wake of continued inflation, thereby driving down oil’s “real” price. It took the second “oil shock” of ear ly 1979 that followed in the wake of the revolution in Iran, to permanently change attitudes toward energy use. Those changes resulted in a shift in the basic structure of the U. S. economy. In d u stries that eith er used large amounts of energy in the production process or that produced goods that used large amounts of energy soon found themselves in difficulty. Autos were among the first to be affected as consumers sought smaller, energy-efficient vehicles that Detroit was not yet equipped to produce. As a result, those industries that depended heavily on automobiles — the socalled smokestack industries such as steel, copper, rubber, etc. — began to suffer a decline in orders and ship ments. Housing was the next to be affected because the increase in ener gy prices made the cost of running a home significantly higher than in the past, pricing some people out of the market. On the other hand, industries that either used relatively little energy in the production process or, more im portantly, were engaged in the ex ploration, production, transmission or savings of energy, found their fortunes much improved. In other words — the U. S. economy became highly seg mented, no longer moving as a mono lith, with all industries expanding dur ing good times and contracting during bad times. The economy was able to bounce back from the declin e in seco n d -q u arter 1979 because the pluses outw eighed the m inuses. However, overall growth soon slowed. M onetarism becom es a fa c to r . The next development approached center stage in October, 1979. This was the F e d ’s break from its trad itional MID-CONTINENT BANKER for January, 1 9 8 2 Competition For Your Customer Deposits • • • M . . . Has Never Been Tougher. a* Tm \ ,_ I WÊÈL >*= McPherson BarttTK. Trust Me Pherson, Kansas You can now protect your market with Cawthon’s free-standing ATM Facilities. Our buildings have been “ battlefield” tested and proven for the past 5 years in Oklahoma, Louisiana, Kansas, Colorado and Texas. With Cawthon you deal direct. We handle planning, sales, manufacturing, installation and service on a turnkey basis. bank’ itT o e x tric o s " 5 to identifyyour Your complete satisfaction is guaranteed by our comprehensive warranty. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Call or write today for important information. Ask for Bob Crumpton, . rffcncAWTHon CmlCAWTHOn L J BUILDING SYSTEM S, INC. 505 Interstate 35 E DeSoto, Texas 75115 (214)223-4900 (214) 223-4900 All the Country’s Top D esigners are right here in the Mid-South. Steelcase, Knoll International, Herman Miller . . . all the best are as close as your telephone and Arrow Business Services, just down the road in Memphis. \ou don r have to go to New York, Chicago or the West Coast to give your bank the benefit of the most modern and space-efficient concepts in office design. We have them a-l/ expertly displayed and in inventory in our huge Memphis showroom and warehouse. As a bonus, the professional design consultants on our staff specialize in bank facilities. Our totally self-contained modular units can help you maximize space utilization and flexibility while achieving a bright, open atmosphere in your entire bank. Unlike adding or moving walls, the cost cf modular units can give you additional advantages such as investment tax credits for capital equipment, and provide you with office space that changes easily when your needs do. We'll be happy to send you information on modular systems or visit with you personally. ARROW BUSINESS SERVICES N G So give us a call or visit our showroom. an affiliate of Memphis Bank & Trust Let us show you what Arrow Business Services 3 0 5 0 M illbranch, Memphis,Tennessee 33116 can do for you and your bank, no further 9 0 1 / 3 4 5 -9 8 6 1 away than here in Memphis. 32 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis MID-CONTINENT BANKER for January, 1 9 8 2 method of conducting monetary poli cy. Previously, the Fed focused on attempting to stabilize money-market conditions by regulating short-term in terest rates. In the process, however, it accommodated inflationary shocks to the econom y by producing more money than was consistent with real economic growth. This, in turn, led to ever-higher rates of inflation as the economy emerged from the various postwar business cycles, along with ever-higher interest rates. In October, 1979, the Fed began to pay more attention to the money sup ply and less to money-market condi tions. It was expected that this mone tarist type of monetary policy would result in more fluctuations in day-today levels of interest rates. This is be cause regulating the supply of money without taking into account changes in demand would produce fluctuations in its price in the same way that regulat ing the price of money by accommo dating changes in demand resulted in fluctuations in growth of its supply. No one was prepared for the amount of volatility that actually occurred in interest rates — especially at the short term end. Sin ce O cto b er, 1979, month-to-month movement in the key federal funds rate has averaged ap proximately seven times the size of the average monthly change in this rate during the previous two years. Because financial-market partici pants became so uncertain over the cost of money, hence their ability to generate a profit on a bank loan, secur ities investment, etc., they tended to demand higher interest rates to com pensate. This spilled over into the long-term markets and as rates rose in these markets, corporate financing tended to dry up. This, along with the high cost of money for those that did borrow in the bond markets, discour aged business investment, leading to declines in another wave of industries — those dealing with capital goods. Needless to say, high short-term rates once again affected the housing and auto sectors, sending them down in early 1980 for the second time in two years. For a while, most companies were able to adapt to these circumstances because the “real cost of borrowing was negligible. Monetarism notwith standing, nominal interest rates were barely above the rate of inflation in the opening m onths of 1980 — and plunged well below the rate of inflation in the wake of the steep decline in economic activity in last year’s second quarter and the Fed s effort to arrest this by injecting reserves into the banking system. This was subsequent- ly followed by a rise in interest rates as the Fed sought to reverse the rise in money growth that followed. In te re st rates rem ained high through the beginning of 1981 even though the rate of inflation had begun to slow under the pressure of a slowergrowth economy, flatness and even tual decline in oil prices and falling prices of food and industrial commod ities. This resulted in a rise in the “real” cost of borrowing money to — regardless of what the Administra tion’s classroom results might have suggested. Since the Fed has adapted a policy of trying to slow the growth of the money supply to noninflationary proportions, Washington’s increased financing needs could come only at the expense of funds available to the pri vate sector. Total federal borrowing, direct and guaranteed, has already risen at a sub stantial rate over the years, accounting M r. Kellner joined Manufacturers Hanover Trust as an associate economist in 1970. He was elected vice president in 1972, named deputy chief economist in 19 73, promoted to senior vice president in 1978 and appointed chief economist in 1980. Prior to joining the bank, he was assistant business outlook editor for Business W eek, senior research analyst with W illiam Esty Co. and research analyst for Philip Morris, Inc. He is a member of the Conference Board's economic forum. He recently completed a term as president of the New York Association of Business Economists. levels not seen in recent memory. The belief that adhering to monetarism would eventually bring lower rates of inflation and interest, along with the hoped-for positive results of the Ad ministration’s planned economic pro gram, encouraged people to overlook these high real costs of borrowing money. Unfortunately, many found that they could not — witness the 40% jump in business failures in the first three quarters of 1981. Fiscal policy pushes business d o w n . The economy thus managed to adapt to m onetarism as w ell. A fter falling sharply in second-quarter 1980, the aggregate measures of business activ ity su bseq u ently bounced back. However, the third development, the Administration’s fiscal program, was apparently too much for the economy to bear. This is ironic, because it was intended to improve business. The cuts in personal and business taxes en gineered by the White House were supposed to boost expectations, stimu late savings and encourage business in vestment in new plants and equip ment. Accompanied by significant in creases in defense spending, with only belated cuts in nondefense spending, this provided a hefty dose of fiscal stim ulus to the economy. It was supposed to generate optimism on Wall Street as well as Main Street, but when people got down to the arithmetic, they con cluded that it could not work. Cutting taxes and increasing de fense spending before putting into effect offsetting reductions in non defense outlays amounted to a sub stantial widening of the budget deficit MID-CONTINENT BANKER for January, 1 9 8 2 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis for a bigger and bigger share of all the funds raised in the financial markets. The belief that this trend will continue finally put the kibosh on economic activity, preventing business from re covering from last year’s downturn. The road ahead looks equally rocky. It will take a long time for the economy to adjust fully to the changed energy environment. Until it does, those in dustries that have been negatively affected by the sudden jump in the price of energy will continue to be so affected. More important, the com bination of a loose fiscal policy and a tight monetary policy will prevent the private sector from mounting any kind of a sustained, healthy recovery. There is one bright spot, however, and that is the prospect for further im provement in the inflation rate. The three major price indexes have de celerated noticeably from their early 1980 highs. The pain of economic slump, by making it more difficult for business to raise prices and labor to raise wages, will ensure a further slow ing in the inflation rate. The more financial participants see inflation dampened, the more likely they are to believe it is “permanent” and the sooner interest rates will come down. While there is always the possi bility that huge federal financings will interrupt this decline and push rates up for a while, I don’t look for rates to rise to new record highs. This is not necessarily because I have any great faith in the ability of Washington to get its budget deficit down. Rather, I feel that interest rates at present levels are already proving 33 onerous to the private sector and, un less accompanied by a sudden turn around in inflation, any increase simp ly would cause more companies to go under, thereby reducing the demand for funds and offsetting increased pressure from the federal government. R ecom m en dation s. I recently called for a tightening of fiscal policy to re duce pressure on the money and credit markets without the Fed resorting to monetary ease. Events of the last few months suggest that such a develop ment is more important than ever. I think the Administration should postpone the second-stage tax cut now scheduled to take effect on July 1. What is more, I think other sources of revenue should be looked for, includ ing a value-added tax. I think the Administration should be more realis tic about how much it is going to get in the way of further cuts in non-defense spending while defense spending is permitted to grow. I believe in tax incentives to encour age business investment, but at the moment these should be limited to firm’s dealing with new energy-saving machines, processes, etc. On the monetary side, I think the Fed should continue its recent move toward somewhat easier money. This is not to say that its growth targets for the various money and credit aggre gates should be elevated. Rather, in the case of the money supply M l-B , the Fed should try to get this aggregate to grow a little faster so that it will be within the target range, rather than below it. It’s clear that a loose fiscal policy combined with tight money only can serve to depress economic activity and not the reverse. No matter what incen tives may be written into the tax law for individual saving and business invest ment, when the federal government Recession to Be Sharper Than Expected, Says Economics Expert at Bank Seminar HE U. S. is headed into a reces sion much sharper than had been expected, predicted economics expert Bruce Bartlett at a recent economics seminar sponsored by St. Joseph Val ley Bank, Elkhart, Ind. The recession, he added, is throw ing the budget out of whack, as unem ployment rises and output falls. Un employment on a nationwide basis is expected to reach 9% by the end of the year. On the subject of interest rates, Mr. Bartlett predicted that long-term rates could be down to less than 12% by spring, and below double-digits by the end of the year. Mr. Bartlett believes the greatest factor influencing interest rates is the actions of the Fed, which controls the nation’s flow of cash. “It seems clear to me that inflation and high interest rates are essen tially functions of monetary policy, not budget deficits. The only way the Fed can lower in terest rates is by stopping inflation. And it can only do that by keeping money growth in a range consistent with the economy’s real output.’’ Summing up the principles of Rea ganomics, Mr. B artlett said, “The hope and promise of supply-side eco nomics has always been to stop the economy’s downward spiral by in creasing the incentive to work, save and invest through a marginal tax cut. Then we can achieve our goal of reduc ing spending and ultimately achieve a T 34 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Below double-digit long-term interest rates were predicted by Economics Expert Bruce Bartlett at economics seminar spon sored recently by St. Joseph Valley Bank, Elkhart, Ind. balanced budget.” Mr. Bartlett, who is author of “Rea ganomics: Supply-Side Economics in Action” and deputy director of the join t economic com m ittee of Con gress, was critical of David Stockman and the Office of Management and Budget (OMB). “In recent months, Dave Stockman has become an obsessed budget bal ancer — even at the expense of higher taxes,” Mr. Bartlett said. “In fact, the OMB has done more to undermine supply-side economics in the last few months than all the Democrats in Washington put together.” He claimed recen t news stories about the federal government facing budget deficits of $100 billion to $300 crowds out the private sector by driv ing in te re st rates up, throw ing businesses into the bankruptcy courts and individuals out of work, it’s clear that neither will take place. Perhaps the time has come to try the opposite — that is, a tight fiscal policy and a relatively easy monetary policy. This will reduce pressure on the credit markets coming from W ashington while at the same time making more funds available for individuals and business to use in their buying and investment decisions. Provided that the Fed doesn’t go overboard with growth in money, I think this might lead to a healthier economy. There will be plenty of time to talk about reducing tax burdens once the budget gets into balance and stays there. For the moment, however, cut ting the budget deficit must be the first priority and it must be done quickly. billion were planted deliberately by Mr. Stockman’s office. The idea was to exaggerate the size of the deficit to scare Congress into making further budget cuts and tax increases. W hile adm itting that P resident Reagan’s recently enacted tax package reduced revenues and thereby in creased budget deficits, Mr. Bartlett pointed out a number of other factors that he says have contributed to the rising deficit: The bumper crop that resulted in lower farm prices last year, requiring larger than anticipated out lays for price supports; oil prices that rose less than expected, which cut rev enue from the windfall profits tax; and an easing of inflation, which means more people are remaining in lower tax brackets. Mr. Bartlett’s appearance was part of a continuing series of economics seminars sponsored by the bank and designed to help area business people gain insight into the state of the econ omy. • • • Wells Fargo Corporate Services. Arnold T. Grisham has been promoted to vice president in the Chicago re gional office of Wells Fargo Corporate Services, a subsidiary of Wells Fargo & Co., San Francisco. Mr. Grisham also has been named deputy manager of the Chicago office’s regional banking division and manager of a new heavy equipment and machinery deal/distributor group. He joined the firm last year. MID-CONTINENT BANKER for January, 1 9 8 2 looked at B u , NCR and some off-premise banking systems. CADO was the most cost-effective,” “/ says James E. Jorgensen, President Central State Bank, State Center, Iowa And it handles everything else you want a system to do in perfect safety: Demand Deposits, N.O.W. Savings, Installment & Commercial Loans, C D ’s, Automated Clearing, House Processing, Consoli dated 1099’s, Capital Notes, Advanced Notices, General Ledger, Word Process ing, Payroll, W -2’s. Everything. “ CADO could process all the daily proof items we needed and gave us up-to-theminute data at any time. I converted to the system in a few days. The loan pack age was up and working in three weeks. Checking, savings, and N.O.W. accounts were on-line in six weeks!’ M r. J o r g e n s e n h a s d i s c o v e r e d BANCADO— the total information sys tem for community banks. I t ’s from CADO— world leader in computer and word processor technology. Heart of the system is CADO’s Customer Information File. It holds complete data on every customer including loan limits, history, and checking account overdraft data. And it interfaces with other BANCADO programs for automatic up dates throughout the system. This single system does the job of both a proof machine and a posting system. MID-CONTINENT BANKER for January, 1 9 8 2 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis For more information about the remark able B A N C A D O System fo r community banks do what James Jorgensen did. Call or write C A D O today. r C A D O ft^ n m CADO System s Corporation 2771 Toledo Street • T o rran ce, C A 90503 (213) 320-9660 Please send me m ore inform ation about B A N C A D O the total in form ation system for com m unity banks. NAME_________________________ ______________________ TITLE BANK. PHONE. ADDRESS L CITY_____ STATE ZIP MCB 71 Structure, U sury, Bankruptcy Issues Continue as M ajor Legislative Topics Bankers Want Freer Hand in Setting Rate Policies ANK structure, usury ceilings, and bankruptcy continue to dominate leg islative issues in the Mid-Continent area. But numerous other topics of vital interest to bankers will be considered by state senators and representatives this year. Following is a state-by-state rundown on issues expected to be considered by 10 of the state legislatures in the Mid-Continent area this year. B Alabam a The following bills are expected to be introduced in the Alabama legisla ture this year: • Corporate name. This bill will provide that a banking corporation organized under the laws of the state must use the words “bank, ” “banking” or “bankers” in its corporate name and is not required to use “corporation,” “incorporated” or an abbreviation thereof. • Joint-account survivorship. This bill would amend the Code of Alabama 1975 as amended relating to deposits in Alabama banks made in the name of two persons, so as to provide that on the death of one the money will be paid to the other. • Exemption of interest on all-sav ers accounts from Alabama income tax. • Privacy. This bill establishes the conditions on which a corporation can disclose financial records of its custom ers and shareholders pursuant to law ful requests of state government, and provides for reimbursement to the cor poration of the cost of such disclosure. Indiana The Indiana Bankers Association has a five-point program planned for this year’s state legislature. • An increase in the ceiling on openend credit from 18% to 20%. • Authority for pre-payment and late-payment charges on simple-in terest loans. • Granting of certain tax conces sions for international banking facili ties. • A bill to clear up some bankers’ acceptances problems and to eliminate 36 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis the average rate that would be charged on consumer loans and closed-end credit sales. • Repeal of the current usury ceil ing on real estate mortgages so as to make Kansas adjustable-rate mort gages acceptable in secondary mar kets. • Revision of the current local gov ernment public funds statute to allow S&Ls to bid on unlimited amounts of idle funds. • Revision of the balloon-payment section of the UCCC to eliminate lan guage relating to interest-rate restric tions. Kentucky the requirement for HCs to obtain annual voting permits. Both items in volve Title 28 of the Indiana Code. The IBA wants to retain authority for HCs to conduct examinations. • An omnibus bill with four parts involving changes to the Uniform Con sumer Credit Code (UCCC). 1. Belief from rights of rescission. 2. Elimination of consumer-related portions of UCCC. 3. Clarification of the definition of minimum finance charges. 4. C larification of a statute on closed-end credit interest rates. A bill has been prefiled by the League for Economic Development to obtain authority for multi-bank HCs in Indiana. This bill, which isn’t sup ported by the IBA, is introduced at every legislative session. Issues expected to be taken up in the Kentucky legislature this year include establishment of credit card fees and rates; higher rates on loans under $15,000; multi-bank HC authority; several revisions in Kentucky banking law; and a proposal by the governor that will affect the investment of state funds. Mississippi Three issues affecting banks are ex pected to be taken up by the Mississip pi legislature this year: • A bill to make permanent the state’s usury law ceiling of 5% above the Fed discount rate. The current temporary ceiling expires June 30. • Legislation giving parity for state banks with national banks. • Enactment of specified exemp tions to the bankruptcy act so federal exemptions will not apply. Missouri Kansas The following issues will receive leg islative attention in the 1982 Kansas legislature: • Revision of the Uniform Consum er Credit Code finance charge brack ets that would allow for an increase in A five-point program is being sup ported by the Missouri Bankers Asso ciation in this year’s legislature: • An attempt will be made to amend the exemption portion of the federal bankruptcy code seeking to reduce ex emptions allowed in the federal law. MID-CONTINENT BANKER for January, 1 9 8 2 • Usury reform that seeks to elimi nate all restrictions on rates lenders can charge for loans, including elim ination of all rate and fee restrictions on motor vehicle time sales, general usury, consumer finance act, a secondmortgage act and retail credit sales act. • A bill to allow a lender to pledge federal government securities it has on deposit with its correspondent bank in lieu of purchasing a replevin bond when foreclosing on collateral. • A bill to require the Department of Revenue to require that space be made available to record liens on boat titles. • A bill to reverse current Missouri law that provides that mechanics and materialmens liens take precedence over the original loan made by a lend er. New M exico The New Mexico legislature is ex pected to address the administration and investment of public funds. The state’s growing severance tax perma nent fund is expected to be the subject of legislative debate as differing invest ment options for these monies are dis cussed. The legislature also is expected to address financial problems created by federal cutbacks. Municipalities want to see the state supplement those areas most severely affected by federal spending cutbacks. Oklahoma The big issue this year in the Okla homa legislature affecting banking isn’t a new topic. It’s banking struc ture; namely, should banks be allowed some form of branching and should HCs be permitted to enter the state and buy state banks? Supporters of branch banking and multi-bank HCs see 1982 as a golden opportunity for legislative change, but advocates of Oklahoma’s current bank ing structure claim the legislature’s ru ral domination virtually ensures pres ervation of the unit-banking status of the state’s banking structure statute. The Oklahoma Bankers Association has not yet finalized its legislative package and other banker groups are waiting until legislation is introduced before making their official stances known. The Independent Bankers Association of America continues to call for preservation of present struc ture, with a few modifications. Oklaho mans for Better Banking continues its support for structure change to permit multi-bank HCs and branching. Tennessee The Tennessee Bankers Association is backing a bill that would allow banks to charge an interest rate equivalent to the rate charged under the Retail In stallment Sales Act on open-end loans. It also would codify all credit-card stat utes and allow Tennessee banks to charge their out-of-state customers an interest rate equivalent to that charged in Tennessee, provided laws in the other state permit charging a lower in terest rate. Two pieces of legislation affecting structure are pending in the legisla ture. (All bills filed in the 1981 session and not disposed of during that session automatically rollover into the 1982 session, since each session extends for two years.) The first piece of legislation would allow merger of banks that have been in existence for five years. The second would reduce restrictions on HC acquisitions and branching. Pending legislation detrimental to banking includes the following: • A revision of garnishment laws to the detriment of creditors. The bill would allow garnishment only of alter nate pay periods, eliminate filing of a list of property to be claimed as exempt and hold the garnishee liable for pay ing any incorrect amount. • Another bill revises foreclosure laws to the detriment of creditors. One provision allows the establishment of a pay-back procedure for a mortgagor who is in default but is on a fixed in come or below poverty level. • Another bill would place a $5 limit on the amount banks can charge for bad checks. It has passed the state sen ate. • Another bill would prohibit “due on sale” clauses in residential mort gages. Tennessee bankers also are con cerned about possible passage of a bill that would outlaw the use of the Rule of 78s. CL Ê LLJC O LJ Vernon Center, Free standing. Thornton, IA Attached display. Capron, IL Custom designed to match architecture. Texas The Texas legislature doesn’t con vene in regular session this year, so it looks like clear sailing for bankers in 1982. • • MID-CONTINENT BANKER for January, 1 9 8 2 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis D DAKTRONICS INC. DAKTRONICS, INC. Box 128 Brookings, SD 57006 Phone 605-692-6145 37 Banks Must Make Unified Effort To Meet Nonbank Competition By Mark W . Olson President Security State Bank Fergus Falls, Minn. fully aware of the investment opportu nities and convenience offered outside the banking industry, are wondering why banks are not offering identical products. Bankers, increasingly frus trated by strong customer acceptance ED ITO R’S NOTE: T h ere’s no su b of nonbank products (witness the je c t hotter in banking today than non m oney-m arket-m utual-fund ph e ban k com petition. At m eetings, con nomenal growth), wonder why busi ventions, sem inars an d in articles in nesses offering bank-like services are b a n k in g j o u r n a ls su ch as M i d - not subject to bank-like regulation. C ontinent B anker , much has been Answers to these questions do not said and written on the su bject. One come easily. p h ilo so p h y o ften e x p r e s s e d is th at An important reason for lack of easy com m ercial ban kers must ag ree am ong answers is that bankers feel the impact them selves on how to m eet such com in varying degrees. As a result, each of petition b efo r e C ongress o r regulators us views the threat of nonbanking com can p ro v id e a clim ate in w hich all petition differently. The famous World fin an cial-service institutions can com War II cartoonist, Bill Mauldin, de pete on an even plane. picted his two characters, Willie and In the follow in g article, M r. Olson Joe, sitting in a foxhole, one saying to discusses this lack o f consensus and the other, “The hell this ain’t the most how im portant it is f o r ban kers to com e important foxhole in the world, I ’m in together and d ecid e w hat kind o f reg it.” Many bankers today feel much the ulatory clim ate they do w ant. same way. We find it hard to focus on * * * the growing competitive threat from nonbank sources while faced with the LL BANKERS and even mildly immediate daily reality of an aggres attentive bank customers are sive savings-and-loan or credit-union well aware of the growing nature competitor of offering strong competi nonbank competition. As a result, two tion. Because changes are coming re-o ccu rrin g question s are being rapidly and because they are affecting asked. Traditional bank customers, each of us differently, we have a lack of A SAVINGS • alt sa v in g s A k • all mutual savings banks OLSON consensus as to the appropriate solu tion. Our lack of a consensus could be costly. Nonregulated businesses have been able to react more quickly to changes in consumer demand than have banks. Should this trend con tinue, they may enjoy a greater share of the new markets created with these new products. The banking industry does not need to concede these new areas, but will be hindered by existing regulation that nonbank competitors do not have. Any hope that Congress will react to this competitive imbal ance by imposing additional regula tions on nonbank types should be dis missed quickly. The banking industry received a strong rebuff to its recent request for imposition of reserves on money-market funds. A strong nega tive reaction from the news media and general public was accompanied by a near-unanimous lack of sympathy from Congress. The possibility of a congres sional solution on this issue is similar. We can expect Congress to react only when a consensus exists in the financial community. W hile considering possible solu- Designed for the busy executive — The nation's newest and most comprehensive Financial Institu tions Directory will be available in January 1982. McFadden's new Savings Directory when combined with its American Bank Directory becomes a handy 3-volume directory of American Financial Institutions. Each listing contains: city, population, mailing address, memberships, phone numbers, top officers/titles, financial data and much more! COMPLETE DIRECTORY — American Financial Institutions — Yes, I want all the nation's top financial institutions in one complete directory: □ Send m e_________copies of the 1982 AFI (g $130 ea. □ Enter standing order for each Spring AFI @ $105 ea. □ Enter standing order for each Spring AFI @ $90 ea. and standing order for Fall American Bank Directory (g $60 ea. (plus shipping and handling) SAVINGS DIRECTORY — American Savings Directory — Yes, I want to add this volume to my library to include savings and loans, mutual savings banks, major credit unions and money market funds. □ Send m e_________copies of the 1982 ASD @ $40 ea. □ Enter standing order for each Spring ASD @ $30 ea. □ Enter standing order for each Spring ASD @ $30 ea. and standing order for Fall American Bank Directory (a $75 ea. (plus shipping and handling) □ SEND ME MORE INFORMATION PLACE YOUR ORDER TODAY! Mail to: McFadden Business Publications, 6195 Crooked Creek Rd., Norcross, GA 30092. COMPANY NAME ADDRESS 38 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis STATE ZIP MID-CONTINENT BANKER for January, 1 9 8 2 SOLUTIONS Construction and remodeling problems require creative, competent solutions. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis The Bunce Corporation. Providing solutions to complex construction problems through creative planning, design and construction management techniques. The Bunce Corporation H St. Louis/Dallas/Kansas City/Tulsa/Houston BUN CE tions, it’s important to look at how Congress reacts to these types of changes. It is not the nature of any elective body to anticipate and provide for great change. Instead, it moves from crisis to crisis, putting out fires and reacting only when it senses a posi tive response from the general public. For a parallel, we need only to look to our nation’s current and continuing energy crisis. When Gerald Ford was President, he introduced emergency legislation to create an energy policy. Six years and two presidents later, Congress has yet to produce anything that could be considered an energy policy. The inability of Congress to create such a policy results from lack of consensus in the nation on energy issues. If we as bankers look to Congress for solutions, we must be mindful of two facts. First, warm feelings still exist in Congress toward the S&L industry. Efforts to help that industry still are considered to be efforts that will im prove housing, which remains synony mous with apple pie and motherhood. The banking industry will receive no statutory relief that is not either pre ceded or accompanied by a “solution’’ to the problem of the ailing thrifts. Second, if we as bankers are to be successful in our efforts, we must reach a general consensus on the type of reg ulatory climate we want to achieve. A splintered banking industry may help keep legislation from happening for a time, but only a unified banking indus try can create a successful legislative effort. • • The Banking Scene (C ontinued fr o m page 6) estimated that approximately seven out of every 10 bankers is a woman. Most of these women are employed in subordinate positions. However, due to their educational attainments and ca reer choices in taking business education courses, it appears that women will move up the managerial ladder in substantial numbers. Though the number of individuals available to enroll in higher education will diminish, it’s quite likely the pro portion of people continuing on to col lege will increase. Thus, more women will be trained in b u sin ess-m an agement subjects. However, the re markable technological changes in banking still will call for a great deal of in-house as well as academic educa tion, although workshops and semi nars outside the bank will decrease in frequency. It’s likely that many train ing devices for education will be adapted for in-bank training programs through the use of computers and cathode-tube displays. The nuclear family of the 1940s, in which the husband was the wage earn er, the wife the housekeeper and one or two children were the norm, has already changed, with the woman being a second wage earner. This trend is anticipated to accelerate in the years ahead, encouraged by the inabil ity of the average family to afford a Bankers Forecast '82 Economy HE PRIM E will be in the 12%-14% range by November, accord ing to 43% of the bankers polled by First National, Chicago, during the bank’s recent bank correspondent conference. Nearly 34% expect the prime to be under 12% and the remaining 20% pegged it at more than 14%. By 1984 the federal budget deficit will be under $50 billion, forecast 45% of those polled. About 40% expect the deficit will be between $50-$ 100 billion. Management of the money supply by the Fed was judged to be about right by 73% of the bankers; “too restrictive” by 20% and “too easy” by the remainder. On the issue of returning to the gold standard, 67% said “no” and 26% said “yes.” The annual inflation rate was projected to be between 8%-10% for 1982 by 50% of the bankers participating in the survey, while 34% thought it would be between 6%-8%. Approximately 35% thought the Dow would be at the 800-900 level, while another 34% projected it to be between 900-1,000 by November, 1982. The long-term interest rate was projected to be between 10%-12% by half the bankers. Forty-one percent felt the unemployment rate would be between 8%-9%, while 36% expected it will be between 7%-8%. T 40 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis house on a single wage. Some types of mobility actually are reduced rather than increased when there are two wage earners in a house hold. This situation could result in less rotation of jobs between the head office and branches. In the poem “Invictus is the statement “I am the cap tain of my fate, I am the master of my soul. While that statement will re main true for certain exceptional indi viduals, it appears that many persons will not have the discretion they had in the past in terms of career selectivity. This is partly due to the exponential growth in knowledge and information. This dramatic explosion of informa tion can be reflected in a simple statis tic. The Federal Register now is pub lishing about 80,000 pages of regula tions per year. Information has been exploding dramatically and will con tinue to do so. However, the other side of the coin is that information retrieval has gone through a dramatic growth period. Now, information on a creditcard transaction can be transmitted across much of the world in a few seconds; a generation ago it would have taken days. Giant banks, such as Continental Illinois National in Chicago, are ex perimenting successfully with locating some employees at remote sites from which they can conduct the bank’s business electronically. Some bankers have no need for face-to-face contact with bank customers or other em ployees. This could very well result in some tremendous psychological im plications of which we cannot guess at this time. What would appear on a scroll with the heading “What is a banker in the year 2000 ? Those features on Dr. Nadler’s scroll probably will continue to be essential qualities for a banker. However, undoubtedly we would add others. The banker of the year 2000 will need a much broader understand ing of computers, communication sys tems, economics and interpretation of government regulations and education in many areas, such as demographics and human-resource management. This means that while a person may be well educated in a liberal arts sense on entering banking, there will be a con tinual need for on-site and off-site education in a multitude of areas re lated to banking. If the Federal Register continues to expand at the rate it has in the past 10 years, it will publish m ore than 100,000 pages annually by the year 2000! Would it be too sanguine to hope that the trend will reverse itself in that area by the year 2000? • • MID-CONTINENT BANKER for January, 1 9 8 2 Don Bramley has been in the banking busi ness since 1957. Now approaching his 20th year of service with Old Phoenix National Bank, he has managed to combine his bank ing responsibilities with com?nunity activi ties, as a member o f the M edina Chamber of Commerce and the Lion’s Club, where he is a past president. Following are some of his com ments on his industry: On the Banking Industry: “ Years ago, a bank would charge a flat 6% inter est rate on everything. Of course, that’s not the case today. Banks have a lot more competition now. We all have the same thing to sell and that is money. The way we can sell it is to be more service-oriented than the competition. At a bank where the customer comes first, that customer will come back— again and again.’ ’ https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis On Bank Profitability: “ The reason we’ re in business is for profit. As a result of recent changes and regulations, that profit picture is narrowing. That's why the vari able rate is essential; banks must have a tool for raising or lowering rates as the cost of funds fluc tuates. Although I won’t predict rates— those who do are generally proven wrong— I do know that everything will be rate sensitive in the years to come. Everything, including automobile loans, will be on a variable basis.” On Credit Insurance: “ I believe credit insurance is a great benefit to the customer. It’s a good feeling for us to give a widow the title to her husband’s car, free and clear, because the husband purchased credit in surance in the first place. And with the new, in creased amounts that we can insure, we're able to offer credit insurance to more people who need it— independent truck drivers, for in stance. It’s a product that makes sense today. On Acceleration: “ There are other companies that offer essentially the same product. But for Acceleration to play the dominant role it has in the industry, the com pany has had to offer better service by keeping up with the changing needs of bank institutions. Another consideration is that a lot of auto dealers in our area deal with Acceleration, and that’s a plus as far as I’ m concerned.” Customers like Don Bramley are a ‘ plus’ for Acceleration. Thanks, Don. Acceleration Life Insurance Company 475 Metro Place North Dublin, O h io 4 3 0 1 7 toll free 800-848-5866 in Ohio 800-282-7328 service. C. Donald Bramley, Executive Vice President, Old Phoenix National Bank, Medina, Ohio N ew Year Brings 'Everym an' IRAs; Banks W ere Last to Announce Rates Nonbank Competitors Get Early Start With Payroll Plans ERHAPS the most troublesome question nagging bankers about IRAs as the New Year dawned was this: “Will I get my share of IRA accounts?” Ranks, for the most part, held off announcing details of their IRA offer ings, especially the interest rate to be paid, until the startup date was on them. Bankers whose institutions had fully developed IRA plans were loath to announce them lest their competi tors learn their rates and offer some thing a little more appealing to the public. Other banks delayed setting rates until the deadline, either not knowing what they would pay or not being able to reach a consensus as to what the market would bear. If IRAs were limited to banks, this procedure probably would not cause concern; yet, while bankers were mak ing last-minute rate decisions, non banks were broadcasting their IRA plans — complete with rates in most cases — to the public through all types of media. One area in which nonbank com petition enjoyed a head start is signing up employees of firms for payroll IRA plans. Insurance firms were especially adept in this area since they often already had a foot in the door through administration of pension and profitsharing plans. Solicitation of payroll deduction signups is a relatively eco nomical way of building up IRA busi ness, since employees can be solicited on the job, eliminating advertising ex pense because a firm’s employees con stitute a captive audience. Most of the larger banks have been active in this area, too. Typical may be H arris Trust, Chicago, which an nounced its “Harris payroll deposit IRA” in December. Harris touts its company IRAs as “an important ben efit to your employees’ package with minimal extra cost or effort on your part.” The bank says employees will appreciate having their IRA deposits P 42 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis By Jim Fabian Senior Editor comfortable with their retirem en t funds in a speculative money fund. Huntington National, Columbus, O., also has been soliciting corporate IRAs. The bank promotes the fact that deducted from their paychecks. Harris IRA deductions are made prior to cal offers to set up IRAs through an ex culating federal withholding taxes so isting corporate-benefit plan. employees have full use of their tax New York’s C itib ank has b een savings throughout the year rather marketing its IRA program to corpora than having to wait until they file in tions nationwide. The bank touts its come tax returns to realize their tax service as d esirable because em deferment. The bank offers fixed-rate ployees want the security of a bank for and variable-rate 18-month certifi their IRAs. Also, a bank spokesman cates. A bank spokesman said the only says, employers prefer to deposit re competition its solicitors had in the tirement money with a bank over a corporate area was brokerage firms. money fund because employees tend H ere’s a rundown on what banks to be conservative and would not be planned to offer consumers opening IRAs starting January 1 (some plans were tentative at press time): • First National, Kansas City, said it IRA Materials Offered would offer two 18-month plans, one “A Legislative and Regulatory R e with a fixed rate, the other with a vari view of the New IR A s” and cassette able rate completely competitive with tapes from a recen t IRA workshop money funds. The bank is stressing the are available from the A BA ’s m arket fact that it offers insured safety for IRA ing division. funds while money funds do not. T h e review explains changes in Customers have the option of split th e IR A law a u th o riz e d by th e ting a $2,000 IRA deposit between the National Econom ic Recovery Plan last year. The booklet was used at the two types of accounts. Interest is com w ell-attended ABA workshops held pounded and added to the funds on a last fall in Atlanta and Kansas City. daily basis at the rate earned by each C o s t: $7 fo r m e m b e r s , $ 1 0 for account. nonm em bers. • First Tennessee Bank, Memphis, T he cassettes w ere made at the offers “Money Shelter” IRAs at either workshops and cover topics such as a floating or fixed rate. The floating“Structuring and Prom oting IR A s,” rate account is indexed to the Fed “ M a r k e tin g R e s e a r c h ,” “ H ig h funds rate and is equal to 100 basis Balance IRAs, S E P s and R ollovers,” points below that rate for the previous “Data Processing Im plications” and “ABA National/Local A dvertising.” w eek. Minimum deposit is $100; Cost: $9 per tape. however, no minimum is required for “T h e “ABA B a n k e r’s G u id e to preauthorized drafts, transfers or IRA s” is expected to b e available payroll deductions. Additional de sh o rtly . T h e re v ise d m anu al in posits of any amount can be added at clu d es in form ation on m arketing any time and interest is compounded strategies as well as cu rrent IRA op and credited quarterly. erations aspects. The guaranteed-rate account re O rd e r s can b e p la c e d w ith quires a $500 minimum for each de A n to in e tte W e ld o n , A B A , 1 1 2 0 C o n n e c tic u t A v e n u e , N. W ., posit and the in terest rate is an W ashington, D C 20036. nounced weekly and is fixed for the 18-month term of the deposit. MID-CONTINENT BANKER for January, 1 9 8 2 • Bank of America, San Francisco, offers a “fixed-rate accumulation in vestment” account with a maturity of 18 to 24 months. Additional deposits can be made at any time without ex tending the maturity date or altering the interest rate established when the account was opened. • Marine Midland banks in New York offer fixed- or variable-rate op tions. The fixed-rate plan extends for 18 months and is set each month for accounts opened during that month. Variable-rate-plan interest changes monthly along with market conditions. The rate is one-quarter of 1% above the average of rates set at the four con secutive 26-week T-bill auctions held immediately preceding the first day of each month. There is no minimum deposit for IRAs opened by payroll deduction, automatic transfer from Marine check ing accounts or simplified employee pension IRAs used by employers. In terest is compounded daily and paid quarterly. • Commerce banks of Missouri are offering 24-month accounts paying one-quarter percent more than the sixmonth T-bill rate. The floating rate is adjusted quarterly. • Mercantile Trust, St. Louis, is offering CDs with two-year maturities and rates that were expected at press time to be indexed to 52-week T-bills. Continuous deposits are permitted. If rates increase, an IRA depositor can freeze his first CD and start a second at the higher rate at the end of the first year. Mercantile is offering three mutual funds — a growth stock fund, a more volatile stock fund of smaller firms and an intermediate maturity fixed-income fund. M ercantile requires a minimum IRA deposit of $50 a month or $500 a year. Deposits can be divided among investment options; there is a $25-permonth minimum deposit for each op tion chosen. Mercantile offers its IRAs through the trust rather than the bank ing department. • Mark Twain banks, St. Louis, offer two 18-month CDs for IRA cus tomers, one with a fixed rate and one with a floating rate. The fixed-rate CD is available for a minimum deposit of $1,000 and pays the same rate as the bank’s 30-month CDs. The floating rate account requires a $500 minimum and additional deposits can be made in $100 increments. The rate is tied to the money-market CD rate, determined by eith er the most recen t weekly Treasury auction or the average of the previous four auctions. • • Thrift Bids for IRA Deposits Prior to January Startup Date N attractive “come-on” effort to - generate IRA accounts prior to the January 1 startup date was made in December by St. Paul Federal Sav ings, Chicago, with its “Retire With a Million” plan. The thrift offered potential IRA account holders 13% interest on IRAdesignated funds prior to January 1, plus a cash bonus of 1% of the amount on deposit on December 31. The funds were automatically rolled over on January 1 into FSLIC-insured 18-month IRA CDs earning “market rates.” Should a customer decide not to keep the funds in an IRA, he had a week’s grace period (the first week in January) to notify the thrift of his change of mind in order to receive a refund with no penalty. The thrift requires no minimum de posit for its IRAs and the floating rate now is one-half of 1% above the higher of the current six-month T-bill rate or the average of the rates of the prior four weeks. The rate changes every Tuesday. Financial institutions report that, gen erally, efforts to secure IRAdesignated funds prior to startup of the accounts proved unsuccessful. • • A WELCOME ID ST. PAUL FEDERAL'S NEW 'RETIRE WITH A MILLION’ IRA PLAN. Deposit and shelter from taxes up to $2,000 a year ($4,000 for wortring couples) starting January 1,1982. And get 13% on your money between now and December 31st* And get a cash bonus of 1% on December 31st. St. Paul Federal's newspaper ad includes chart showing growth of IRA funds when left on deposit until age 65. A 20-year-old depositing $2,000 per year to age 65 at 14% interest would have almost $7 million at retirement! Ad promised 13% on funds prior to January 1 plus 1% cash bonus on December 31. P re m iu m s , P ro file s P iq u e In te re s t O f P o te n tia l IR A C u sto m ers NNOVATIVE ways to sell IRA accounts include the use of pre miums and computer profiles. The premium approach is being used by Bank of Hawaii, Honolulu, to attract IRA customers away from the bank’s competitors. Starting January 1, the bank offered 20 free silver dimes to the first 1,500 customers contribut ing at least $200 toward an IRA. The coins are pre-1964, which makes them valuable to collectors due to their sil ver content. The U. S. Mint stopped using silver in dimes after 1964. The bank, which is the state s largest, doesn’t usually give pre miums, but the dimes, which had been in the bank’s vaults for almost 20 years, seemed a natural for IRA customers, especially since the bank’s competitors — primarily thrifts — were offering premiums. I MID-CONTINENT BANKER for January, 1 9 8 2 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis According to James M. Boersema, the bank’s public relations manager, the bank offered premiums for IRAs because they would encourage prospective customers to wonder why the bank was so eager to solicit IRAs. “We believe the IRA is one of the best deals to come down the pike for both customers and banks,” he said. And we figured that the fact that we are offering a distinctive premium would signal consumers that we are commit ted to this account and think it is a boon.” The bank began advertising its dime offer at the end of November through posters in its 60 branches, direct mail brochures to customers and TV and newspaper ads. First Huntington (W. Va.) National is using computers to profile potential IRA customers to show them how their 43 financial fortunes will soar once they sign up for an IRA. Ads in local newspapers contained coupons requesting consumers think ing about opening IRAs to submit their names, addresses, ages and ages at which they wish to retire along with the amounts they expect to contribute annually to IRAs. The profile measures the projected computations of an individual’s “IRAbility,” enabling the individual to see how an IRA will grow based on the choice of contribution and interest paid. Monthly income potential and tax savings also are projected. The program computes the pro jected profiles using three different rates, the lowest possible of which is the 9% floor the bank has imposed, the current money-market rate and a rate somewhat higher than the current rate. The projection also indicates how much a consumer would receive at ages 60, 65 and 70. The bank has been profiling the public since the end of November and had drawn in about 200 responses by m id-D ecem ber. Four staff people assist in explaining and servicing cus tomers who want IRAs. The bank will send a personal representative to visit individuals who request more informa tion about the retirement accounts. The educational program is ex pected to continue for some time, according to a bank spokesman.* • Government-Relations Forum Set by Consumer Bankers The Consumer Rankers Associa tion’s third annual retail banking gov ernment-relations forum will focus on legislative and regulatory develop ments of importance to the retail bank ing industry in 1982. The forum will be held January 2526 at the Crystal City Mariott Hotel, Arlington, Va. Among the featured speakers will be Senator Richard G. Lugar (R.-Ind.), a member of the Senate Committee on Banking, Housing and Urban Affairs. His topic will be the Credit Deregula tion and Availability Act of 1981, which would preempt rate ceilings on all con sumer credit. Participating effectively in the leg islative and regulatory process, dereg ulation of deposit services, usury, bankruptcy, the new payments code and the Financial Institutions Restruc turing and Services Act of 1981 are among the other issues to be covered by congressional and bank regulatory agency policymakers, attorneys and retail banking industry leaders at the forum. 44 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Bank O ffers IRA Hotline Worthen Bank, Little Rock, started a toll-free IRA hotline service last month to enable consumers to query the bank about IRAs. The tollfree phone service was available throughout the state of Arkansas. Questions were fielded by the bank’s IRA specialist, Ed McCul loch, a bank officer and Worthen em ployee for 18 years. The hotline received 390 calls the first week it was in operation, an average of about 65 calls per day, according to Patrick O’Sullivan in the marketing department. The greatest number of calls was re ceived on the first day of the service. According to Mr. O’Sullivan, about 55% of the first week’s callers had general questions about IRAs, 35% inquired about interest rates, 10% had questions about IRA rollov ers and 5% wanted information about when “everyman” IRAs would be available. Those wishing rate in formation were advised to watch for newspaper announcements later in the month. Among the callers, Mr. O’Sullivan said, were some bankers. The service was set up to operate only during December, but there was a possibility it would be ex tended into January if conditions warrant, Mr. O’Sullivan said. Bolger (C ontinued fr o m page 24) are not the culprit; they can be indexed at a high enough market level so that banks are not disadvantaged in com petition with money funds. Removal of interest-rate ceilings overnight pri marily would help the go-go banks or the hard-pressed S&Ls, which might gamble on predatory rates just to cap ture market share. The rest of us would just be trading new problems for old. D on’t sell your competitive abilities short. Small banks are potentially light on their feet and can cut and try ser vices with an ease financial giants must envy. We also are smart enough to recognize when basic changes in the marketplace make certain banking practices obsolete regardless of how comfortable and longstanding they have become. We know that new flexi ble loan and deposit instruments are the only types compatible with a cli mate of roller-coaster interest rates. We know we must apply a sharper pencil to our costs and the charges we make to meet them. We know we must broaden our access to credit markets, explore shared facilities, reduce sys tem costs and gain any possible com petitive advantage larger institutions may have — without surrendering the virtues and responsibilities of serving the financial needs of the people of our communities. Do remember that you are not alone in facing these new competitive chal lenges. Over 90% of the banks in this country are community banks with common business goals and frustra tions. We should rely on one another for resource information so that each of us does not need to reinvent the wheel each time we develop a new service. There’s no shortage of political issues we might resolve if community bank ers as natural allies concentrate their common energies by working together to redu ce the burdens of o v er regulation, to ensure the orderly pro cess of deregulation, to develop firstclass consumer services and to encour age regulators and their examining agents to work f o r us instead of against us. D on’t accept dire predictions about small banks’ future as gospel or the advent of massive changes in banking as inevitable. The perennial tune sung by the prophets of small banks’ doom is self-serving and can becom e selffulfilling by spreading a psychology of fear designed to frighten small banks and make the battle seem lost before it’s even been contemplated. Next time you read an article pre dicting interstate banking and its fall out for small banks, check the sources cited. 1 11 wager that in nearly every case the bankers interviewed repre sent money-center interests rather than a cross-section of the banking in dustry. Independent studies such as one done in 1981 by the Fed have con cluded that small banks are not only viable in the face of increased competi tion, they actually have outperformed larger banks in profit and deposit growth and have done so consistently over the past decade. To give some perspective, I have a copy of another article from Business Review entitled, “Small Bank Survival: Is the Wolf at the Door?” It’s dated almost 10 years ago. Each new crop of bankers probably believes it is facing competition for banking business that has never been more severe or challenging. Maybe it’s true. But competition in banking is not like a sporting event where there al ways is one loser for every winner. The banking market can and will contain many winners, large and small, each surviving and prospering beside the others. • • MID-CONTINENT BANKER for January, 1 9 8 2 Mainous (C ontinued fr o m p age 26) few large m ultipurpose financialserv ice corporations, rath er than thousands of individual, specialized financial institutions competing on be half of the special needs of their cus tomers. Restrictions on G eographic, Func tional E x pan sion . The trend is to elim inate restrictions on geographic expan sion and barriers that prevent institu tions from performing a variety of financial services, such as banking, brokerage, insurance, e tc ., across state lines. The present system was established on a constitutional model, whereby states would have the right, through their voters, to determine what form and system of banking are best suited to meet their economic and social systems. A federal government override of this authority, whether by overt action or by passive acquies cence, does not appear to be in line with the checks, balances and rights of states, as guaranteed by the U. S. Constitution. Responsive competition betw een federal and state systems appears slated for termination under “deregulation.” P u b lic C o n s id e r a t io n s . Changes that affect the safety, stability and re sponsiveness of financial institutions to the general public are of great concern and should not be taken lightly. One basic effect of current trends is a com petitive system that tends to elevate substantially the cost of all banking ser vices, whether they be checking ac counts, safety deposit boxes or credit. Will small customers have institutions competing for their business? Would giant institutions have a tendency to divert usable funds to large corpora tions and international business? What control will regulatory authorities have on allocation of these funds? Basically, it appears that local bank ers may no longer continue to have authority to allocate funds to local com munities as they have for the past 50 years. Competition for funds to the local level probably will increase, while competition for allocation of use of funds at the local level may de crease. Finally, commercial bankers must use their influence now to bring about decisions they consider to be best suited for their customers as people. As a bank’s customers prosper, the bank and its shareholders also should prosper. • • MID-CONTINENT BANKER for January, 1 9 8 2 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis When Midwestern bankers want to aug ment their own expertise, they turn to “the banker’s banker” . .. Stern Brothers and Co. With 64 years of experience, we can pro vide your investment department with valu able backup services, helping reduce the time it takes to make important decisions. We offer analysis and appraisal of all types of securities. As a major marketer of mu nicipals, we make bids on liquidations of municipal bond portfolios. Our research staff furnishes current information on both listed and unlisted stocks, and we are a prime source for their purchase. We also can provide evaluation of bank customers’ securities when used as collateral. To sim plify the investment process for your bank, consult the specialists, Stern Brothers. B r o th e rs Si C o . Established 1917 Suite 2 2 0 0 City Center Square P.O. Box 1 3 4 8 6 Kansas City, MO. 6 4 1 9 9 8 1 6 -4 7 1 -6 4 6 0 Focus G roups Review IRA O ptions; H elp Bank Determ ine Its Product U C C E S S F U L bank-m arketing strategy relies on the ability to understand the needs and concerns prospective customers so products — such as individual retirement accounts (IRAs) — can be positioned by their characteristics and uses. The job of advertising is to communicate salient benefits that satisfy those needs. In common with consumer and in dustrial-product companies, banks must deal with such questions as: • What population segments, in terms of demographic life-style and user characteristics, are potential cus tomers for IRAs — or any product being offered? • What features of IRAs will provide recognizable benefits to which con sumers? • Are there any negative compo nents that must be eliminated or mini mized? • W hat appeals have the b est chances for stimulating product aware ness, creating enough involvement to get the consumer to open an IRA? • Does the product fit the percep tion of the sponsoring institution so positive attitudes and feelings are en hanced? An integral part of the new-productdevelopment process at Third Nation al is the employment of qualitative re search to obtain answers to these and other marketing-related questions so that marketing strategy can be formu lated with confidence that the product will meet with widespread consumer S https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis of By M. C arl Sneeden Vice President Third National Bank Nashville understanding and acceptability. The vehicle often used to provide the necessary consumer input is a series of focus-group interviews con ducted regularly by Donald A. Chase, president, Chase Research, Inc., an Atlanta-based consulting firm that spe cializes in research and planning activ ities for financial institutions. As Dr. Chase says, “Focus-group in terviews are designed to explore in depth the perceptions and feelings of individuals from selected population segments that seem to represent the best customer potential for the prod uct being developed. Such informa tion gives us insights into how’ and why people are likely to behave as they do and helps to determine their underlying thought processes about the product concept being fashioned by the firm.” A focus group usually includes from eight to 12 participants, individually recruited by phone, who meet around a conference table for two hours. Using a discussion guide prepared in ad vance, the group moderator selects topics for discussion and encourages the interchange of ideas among partici pants. Compared with other datacollection techniques, the focus-group atmosphere tends to produce a great deal more candidness due to the social situation and the emphasis on a single subject for an extended period. The opportunity to interact with others helps participants verbalize their atti tudes and beliefs. One of the modera tor’s responsibilities is to create an en vironment that encourages acceptance of each person’s expressions without the necessity of holding back or de fending a position because of his or her accustomed social roles or proprieties. By virtue of the moderator’s partic ipation in the study — and a reminder provided by tape recordings of the in terview sessions — the analysis utilizes the specific expressions used by partic ipants in describing their feelings and reactions. Since any single group can develop tangents, a series of two or more interviews provides the analyst with a chance to compare the output of different sessions in arriving at valid study conclusions. Critics of the focus-group technique often point out its unrepresentative ness of the total population base. Yet, as Dr. Chase points out, “Focus-group research is intended to be used as an exploratory procedure, providing a body of data that must be quantified if the intent is to project study findings to a larger universe. By themselves, re sults of group interviews should be used cautiously as providing a number of hunches that must be confirmed by further research using an appropriate sampling design.” Because of previous successful ap plication of focus-group research to the m arketing of autom atic teller machines, evaluation of new services for special segments of the market and their employment for the examining of the meaning of advertising themes and copy approaches, Chase Research was contacted to perform a similar study. The purpose: to help Third National define the market for IRAs and, by better understanding consumer feel ings about the concept, help the bank position its IRA program to optimize the likelihood of success. Three focus groups were assembled for the IRA study, two of which con sisted of white-collar job holders and the third of blue-collar workers. Par- MID-CONTINENT BANKER for January, 1 9 8 2 ticipants’ ages ranged between 28 and 62 years and each had an annual per sonal income of $25,000 or better. At the outset, interviews were used to determine the awareness level of IRAs among participants. Because most people probably would be rel atively unfamiliar with provisions of present programs, a description of the federal law governing IRAs was dis tributed to participants to elicit their levels of understanding, initial interest in the concept and perceptions of spe cific benefits or disadvantages. From the interchange among par ticipants, it was concluded that: • IRAs offer an interesting plan to supplement retirem ent income. In come is eroding due to inflation and pension provisions are inadequate to maintain expected life-styles because of problems with Social Security. • A significant benefit is the oppor tunity to defer some taxable income until income is reduced so that less tax must be paid. • There is considerable merit in a plan that is individual — rather than employer — controlled. • Through payroll deductions, em ployees will be provided with a rel atively painless way to accumulate re tirement savings. As the concept of IRAs became more familiar, blue-collar workers voiced considerably more enthusiasm, citing concerns about job security and their ability to meet financial commitments after retirement. The need to make continuous regular contributions to a retirement fund is believed a necessity but difficult to accomplish unless a payroll-deduction program is offered by employers. The plan also should allow reasonable deposit amounts. Among w hite-color participants, there was less immediate endorse ment of IRAs and more emphasis on being provided with detailed compara tive proof that IRAs would appreciate their income as well or better than other investment instruments. Whitecollar workers displayed considerably more confidence in their own ability to manage th eir personal resources. While considering an IRA plan, they likely will investigate differences be tween alternative sources, looking for competitive advantages before arriv ing at a purchase decision. Their re sponses to IRAs were more noticeably analytical compared with the emotion al responses of the blue-collar group. In the process of providing initial reactions to IRAs, participants were encouraged to voice their feelings about the selection of a financial in stitution. Presently, there is substan- Kane Cochairs Fund Drive Named cochairmen to raise $425,000 for the Nashville Symphony Association's 1982 support drive are Charles J. Kane (I.), ch./CEO, Third N at'l, N ashville, and Richard Hanselman, pres./CEO, Genesco. tial agreement that banks and credit unions are attractive institutions for in vestments due to their conservative orientation, frequency of business con tacts with the customer, ability to transfer funds readily between ac counts and federal-insurance protec tion. When maximum appreciation of funds is considered, brokerage houses have a decided perceptual advantage, but they are seen as riskier. Some par ticipants believe banks are essential ly monetary-exchange institutions, therefore are less likely to be resource ful in the management of assets. Recently publicized losses by S&Ls make a long-term investment at a thrift appear risky, the groups felt. In an u nregulated en v iron m en t, banks seemed to them to offer more security and dependability. Insurance companies are perceived as often employing agents who have limited knowledge in this field and thus may confront customers with difficult-to-understand programs. Real estate has lost its perceived glamour as an investment vehicle due to per sistently high interest rates and the necessity of foregoing possibilities for immediate liquidation. Participants say that inflation has caused them to reassess spending priorities so, in effect, they are saving small amounts today in spite of com pensation increases. Yet they share concerns about insuring their future well-being by setting aside funds to augment other retirement income. In this context, they see IRAs as a logical necessity for every employed person. W hen participants directed their thoughts to benefits associated with IRAs, in order of their priority, the most important considerations were described as: amount of appreciation in annual percentage interest rate, terms offered, provisions for short term liquidity, incentive of deferring taxes, security of invested funds, MID-CONTINENT BANKER for January, 1 9 8 2 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis amount of individual risk, institutional stability, degree of perceived finan cial-management expertise, conveni ence of business locations and oppor tunities to be accorded courteous per sonal treatment. The interest rate is a key factor in motivating consumers to actively seek out an investment opportunity. With rapid fluctuations in interest rates over the past few years, consumers are wary of being locked into a fixed rate for a long term. When asked if they favored a variable or fixed rate for IRAs, the majority selected a varying rate on a weekly basis so they could take advan tage of any rate increases. When re minded that interest rates could fall as well as rise, participants were not un duly concerned, because rates tend to reflect overall economic conditions. However, the idea of a guaranteed floor below which interest rates would not fall provided an important but essentially psychological benefit that was appreciated by participants, even if the interest floor was pegged as low as that for demand-deposit accounts. The perception of attractive rates depends on term length. If the instru ment is an 18-month certificate, a few participants modified their views to endorse a variable rate, but fixed for the length of the term with a renewal or conversion option at the rate pre vailing at certificate maturity. When the moderator suggested that the interest rate might be tied either to weekly Treasury-bill auctions or to money-market rates, personal involve ment in the IRA concept increased no ticeably. The proposition suggested IRA sponsorship by a brokerage house since consumers have become con ditioned to lower interest rates being offered by banks and S&Ls. With the realization that a bank could conceiv ably be thinking of such a product benefit, attitudinal expressions con tinued favorably. Such a provision would seem to combine maximum security with low risk in a familiar in stitution already frequented regularly. Blue-collar participants placed an emphasis on the amount of the mini mum opening deposit and wanted assurance that subsequent deposits could be made in small increments, p referably by payroll deduction. White-collar employees felt their com pany would welcome presentations by IRA sponsors because of the em ployer’s interest in the future well being of its employees. They visual ized employers being able to accom modate payroll deductions as they do for insurance and charity donations. (C ontinued on page 53) 47 This building, which housed Illinois Trust & Savings Bank, stood at LaSalle and Jackson from 1897 until being torn down in 1923 to make way for what is now Continental's world headquarters. This structure was designed by Daniel Hudson Burnham, winner in national competition, and cost $600,000. After 1871 Chicago fire, this building housed first predecessor of Continental Illi nois Nat'l — Merchants' Savings, Loan & Trust Co. Located on northeast corner of Madison and Dearborn, structure was site of bank from 1872-1881. In C h ic a g o : C o n tin en tal Bank Looks Fo rw ard To 1 25th B irthday Continental's present quarters, with its six ionic columns, was built for its most impor tant predecessor, Illinois Merchants' Trust Co. This photo was taken in 1924 as build ing — then tallest structure in Chicago — neared completion. In background is old Board of Trade Building, which was razed in 1928 to make way for present Board of Trade building. 48 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis M ILESTO N E ANNIVERSARY — its 125th — is being observed by C hicago’s C on tin ental Illin ois National by focusing on the people re sponsible for the bank’s longevity, its employees. The celebration, which began in October and will stretch into mid-1982, is centered on the theme, “Building on Basic Strengths.” Illinois’ oldest and largest bank is planning these key events: an 1857 employee lunch on January 28, the anniversary date, at that year’s prices, distribution of anniversary mementos to all employees and pensioners world wide and jo in t observance of the anniversary with city and state offi cials. Also, a special image brochure and film will be produced, and the 125thyear theme will be applied to countless regular bank items and events, includ ing new-office openings, various em ployee parties and periodical bank re ports. Banners commemorating the occa sion were hung at all customer banking centers the first week in January. At the 1857 employee lunch January 28, all employee dining areas will be deco rated and food-service staff will be dressed in the style of the day. The meals will cost employees what they would have paid for similar fare in 1857, and musicians playing selections from that period will entertain diners. In addition, Continental personnel around the world will observe the anniversary in keeping with local re quirements and preferences. The B an k’s H istory. Continental’s family tree, which has many branches, began growing January 28, 1857, when its earliest predecessor, Merchants’ Savings, Loan & Trust Co., was estab lished by a group of Chicago business men, who subscribed $500,000. In contrast, last September 20, the bank had $29.8 billion in total deposits and about $44.6 billion in total assets, mak ing it the seventh largest commercial bank in the country. The 1857 bank was created as a con servative institution in an era of “wild cat” banking. Its name was modified in 1881 to Merchants’ Loan & Trust Co., and its location was changed several times as it and the city’s business cen- MID-CONTINENT BANKER for January, 1 9 8 2 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis J This 1958 building doesn t look or act its age. Inside and out, both the form and function of this bank were recently updated by Bank Building Corporation. Decades of success and growth had committed Citizens National Bank to their established location, and they'd outgrown their building in the process. Total redesign was needed; Both inside and outside wall surfaces were removed and replaced. Floor area wras doubled. In the process of becoming a more use-filled building, the new Citizens has made a strong visual impact on its community. This project was completed on budget and on time, with minimum inconvenience to customers and employees. Which comes with practice: since 1913, Bank Building Corporation has completed over 8000 projects—many of them remodeling assignments. We know that some older buildings are right for remodeling, while others are not And we've learned to know the differences between them. Before your need to remodel or build becomes acute, please call Tom Spalding at 314/647-3800. Let’s become acquainted and share more information. Ask us to show' you a new beginning or two. 1130 Hampton Avenue St Louis, Missouri 63139 Performance According to Plan. TRAVELERS EXPRESS ■¡¡ras ÏÏD (MR at processing paper items but not so very scary. The Paper Tiger can process Money Orders, NOWs and Officiai Checks more efficiently and at lower cost to you than your back office. Because that’s all we do. We reconcile, file, store, trace, stop payment and clear up all the problems that pop up daily. We do everything your back office now does and we do it at lower cost. And, in the case of Official Checks, you may also be able to increase balances or receive cash payments. The Paper Tiger is financially stable (a member of the Greyhound family), totally reliable (we’ve been in the payments systems business since 1940), and, unlike other ppliersof remittance services, we are not in the least bit interested in becoming a bank. Theres nothing to fear from the Paper Tiger; he works expressly for you. For more information call 1-800-328-5678 and ask for Gene Lewis. Travelers Express-ly working for you. Travelers Express ^ A GREYHOUND .m - W G c p COMPANY 5075 Wayzata Blvd., Minneapolis, MN 55416 50 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis MID-CONTINENT BANKER for January, 1 9 8 2 ter grew. It was located in its first home — on the northwest corner of South Water and LaSalle streets under the Board of Trade rooms — until 1860, when the bank was moved to the Dickey Building at Lake and Dearborn streets. The great Chicago fire of Octo ber 9, 1871, caused another move. W h ile many buildings w ere still smoldering piles of rubble, the bank s president, Solomon A. Smith, set up temporary quarters in his home at 414 Wabash Avenue. By the way, the fire did not result in any depositor losing a penny, although all the bank’s records were destroyed. Fortunately, cash and securities re mained untouched by the flames, and bank officials decided to honor the word of their depositors as a guide in paying out funds. Ultimately, the bank charged off losses of only about $55,000, a small percentage of its total resources of $3.7 million (as of Decem ber 30, 1871). This was done rather than take court action to adjust and settle each claim satisfactorily. The first Chicago bank to use “Con tinental” in its name was Continental National, chartered in 1883. This bank and Commercial National were com bined in 1910 to form the city’s largest bank, C on tin ental & C om m ercial National. A trust and savings affiliate, Continental & Commercial Trust & Savings Bank, was set up at the same time. In su cceed in g years, the bank moved and changed its name several times. In 1900, it had erected its own building at Adams and Clark streets. In 1923, Continental’s oldest antece dent, Merchants’ Loan & Trust Co., was merged with Illinois Trust & Sav ings Bank. The latter was founded in 1869 as Sterling (111.) Bank and was moved to Chicago in 1893, and its name was changed. With the 1923 merger, the word “Illinois” became a part of Continental’s name for the first time. In 1924, Continental moved to its present quarters. In 1927, Continental & Commercial National and Continental & Commer cial T ru st & Savings Bank w ere merged to form Continental National Bank & Trust Co. Two years later, Illi nois Merchants Trust was merged with it, creating Continental Illinois Bank & Trust Co. This merger gave Chicago its first billion-dollar bank, with capital funds of $140 million and total re sources of $1,162,000,000. In 1932, the present institution, Continental Illinois National Bank & Trust Co., came into being when it was issued a national charter. The most recent mer ger occurred in 1961, when City Solomon A. Smith was one of the founders of Con tinental's original forerunner, Mer chants' Savings, Loan & Trust Co. (1857) and was its third president from 1860 until his death in 1879. During Chi cago fire in 1871, he removed bank's valuables to his home. National was merged into the Con tinental family. Since 1969, Continental has been the wholly owned subsidiary of a onebank HC created to allow diversifica tion into other financially related ser vice areas. Originally called Conili Corp., the parent company’s name was changed to Continental Illinois Corp. in 1972. Last September 30, the HC had assets of $46.2 billion and deposits of $29.6 billion. In 1976, a major reorganization of Continental’s corporate-banking activ ities in the U. S. and overseas was in itiated to enhance the bank’s respon siveness to the evolving needs of cor porate customers. The commercial, in ternational and newly formed financial services and multinational banking de partments were brought under the single heading of general banking ser vices to provide coordinated manage ment direction. Last February, the new U. S. bank ing and special industries departments were developed as part of general banking services. Taken together, these two new departments comprised what previously had been commercial banking services. In Decem ber, 1980, Continental Milo Hopkins Dies Milo B. Hopkins, 80, former e.v.p., and head, national div., Manufacturers Hanover Trust, New York City, died re cently at his home in Fort Lauderdale, Fla. At the time of his retirement in 1966, he supervised the bank's business with more than 1,500 in dustrial and corporate customers outside the metropolitan area of New York City and some 4,000 correspondents of the bank. He joined Central Hanover Bank, predecessor of Manny Hanny, in 1940. MID-CONTINENT BANKER for January, 1 9 8 2 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis announced it was leasing 260,000 square feet of space in New York City for the purpose of relocating and con solidating all of its New York opera tions in a single building. The latter, called Continental Illinois Center, will be ready for occupancy this year. • • ABA's Marketing Meeting Set for March 10-12 The ABA’s corporate/commercial m arketing co n feren ce is set for March 10-12 at the Hyatt Regency Hotel, San Francisco. Product management, officer-call programs, pricing corporate services and cash management are topics for concurrent sessions that will be re peated with different speakers on each day. Among the speakers set for the co n feren ce are ABA P resid en t Llewellyn Jenkins, vice chairman, Manufacturers Hanover Trust, New York; James Shennan Jr.„ president, S & O Consultants, San Francisco, speaking on corporate identification; John G rundhofer, execu tive vice president, W ells Fargo Bank, San Francisco, discussing marketing seg mentation; and Dennis Evans, presi dent, First Bank Minneapolis, who will speak on m arketing planning and asset/liability management. Washington W ire (Continued fr o m page 8) th rift institu tion s in return for a guaranteed end of the interest-rate dif ferential and deposit-interest-rate ceil ings no later than 1986. That trade-off was agreed to by all parties involved when the law was enacted. The disconcerting fact as 1982 opens, however, is that many of those groups purporting to speak for regulated depository institutions in Washington have not yet been able to agree on what deregulation means. Reaching such an agreement is the paramount priority. Absent such an agreement, the only certainty is that less-regulated finan cial intermediaries will continue to attract a larger share of the deposit market. The new Sears fund is ex pected to join other new entrants in the market in the near future. With m oney-m arket-m utual funds ap proaching the $200-billion mark, and continuing to grow at nearly $3 billion per week, the question is how long regulated depositories can afford to re main in disagreement on the necessity of deregulation. • • 51 C en terre — A U nique N ew N am e A ppears in M issouri Banking W HEN a bank decides to change its name, the action is not done overnight, nor is it done lightly. This can be attested to by the former First National ijn St. Louis, which, along with its parent firm, First Union Ban corp. and the HC’s other subsidiaries across Missouri, adopted the name C enterre effective January 4. On that date, First Union became Centerre Bancorp.; its lead bank, First National in St. Louis, became Cen terre Bank; St. Louis Union Trust Co. became C enterre Trust Co. of St. Louis, and each of the affiliate banking members in Missouri’s largest HC be came Centerre Bank. “Our new name,” says Clarence C. Barksdale, Centerre Bancorp, chairman/CEO, “is a positive response to some significant changes in our bank ing environment.” According to Mr. Barksdale, the HC and its affiliates, operating under the Centerre name, enjoy three distinct advantages: ‘The name Centerre, a bold and unique nam e, will m ore strongly associate us with the Mid-America markets we serve and better position our company as the preeminent re gional banking organization serving that area. Secondly, a common name for all our affiliates will provide a common banner and basis for a more synergistic marketing effort in Missouri. “Finally, a new name will eliminate institutions was made after years of consideration and, more recently, ex tensive study and research. The actual nam e-developm ent process began more than 18 months ago, when a spe cial bank committee established pre cise criteria that would have to be met if the bank were to change its name. The new name would have to be fresh, original and easily recognizable. It would have to be linked strongly to the BARKSDALE FORD bank’s regional heritage and would have to communicate a modern, pro Clarence C. Barksdale is ch./CEO, Centerre fessional and progressive image. Bancorp., St. Louis, formerly First Union Bancorp. Richard F. Ford is pres, of HC and In light of these criteria, more than of its lead bank, Centerre Bank in St. Louis, 1,000 potential names were gener formerly First Nat'l. ated. During lengthy sessions, indi vidual names were examined by the confusion by differentiating our com bank committee and ultimately dis pany from other banking companies carded if they did not meet established with similar names and from other criteria or were found to be unavail banks using ‘First’ in their corporate able for various reasons. The list of identifications.” candidates finally was narrowed to 25 Mr. Barksdale further notes, “The names. Missouri legislature is considering These 25 semifinalists were sub changes in our state’s banking laws that je c te d to an intensive tradem ark will permit statewide banking, and search to ensure each name’s legal Congress is moving toward passage of availability. Ease of pronunciation also more flexible interstate banking laws was tested and a language specialist that will enable us to acquire banks and engaged to remove from the list any offer banking services across state name that carried negative connota lines. We must be ready to respond to tions in foreign languages. At this these changes when they happen. Our point, the list was narrowed again un goal is to become Mid-America’s bank til, finally, two names remained. ers, and our new name will help us do Before a final choice was made, the that. ” two candidates were submitted to ex R esearch . The decision to change tensive consumer testing. Reactions to the names of the HC and its member the finalists were recorded during phone surveys and hundreds of per sonal interviews. The research sample included retail customers and mem bers of the business and investment communities. The unanimous choice after all this? Centerre, a name, says a bank spokes man, that echoes the word “center” and is descriptive of markets served by the HC. Centerre President Richard F. Ford notes, “It’s a creative name — distinc These are logos for renamed First Union Bancorp, (now Centerre Bancorp.), tive and stylish. It does an effective job First Nat'l (Centerre Bank) and St. Louis Union Trust (now Centerre Trust Co.), of relating our organization to the all in St. Louis. HC's affiliate banks throughout Missouri also now bear marketing territory we serve.” Centerre name. F irst Union Bancorp, directors approved the new name last June 12, CENTERRE RANCORPORATION CENTERRE RANK CENTERRE TRUST COMPANY 52 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis MID-CONTINENT BANKER for January, 1 9 8 2 newspaper and outdoor advertising across the state. It also is being used nationally in publications like Business W eek and W all Street Jou rn al . Other means of communicating the new name include mailings to customers and the HC’s 1981 annual report. “Operating under the banner of Centerre,” says Mr. Barksdale, “we are confident our strong reputation for quality service will be maintained. As Centerre Bancorp., we look forward to meeting the challenge of the future. ” IRA Marketing Tool A bank in New England that is aggressively prom oting IRAs is en couraging individuals to phone the bank on a toll-free line to arrange for an investm ent analysis. T he banker answering the phone asks three questions: • How much do you think you can save each week or month in an IRA? • How many years to the date when you plan to retire? • How much would you like to have in monthly payments on re tire m ent? Third National (C ontinued fr o m page 47) This is future headquarters for Centerre Bank in St. Louis at One Centerre Plaza. Some departments now are moving into building, and grand-opening ceremonies are scheduled for this April. and its shareholders followed suit Au gust 26. To communicate the new name to the 4,000 Centerre employees in Mis souri, the bank commissioned a special film, which was shown at all 21 bank locations during Septem ber. After each showing, employees received a cassette tape of the sound track, com posed entirely of original music and lyrics. In addition, an intensive media cam paign is being aimed at what the bank describes as its key publics. The cam paign is using TV, radio, magazine, Credit Seminars Set Two co m m ercial-cred it analysis sem inars will be held at Louisiana State University, Baton Rouge, this year. T he first will b e February 7-10, the second, May 2-5. T he sem inars w ere scheduled af te r a similar sem inar last year proved so popular that bankers w ere turned away. E ach sem inar is lim ited to 60 individuals, according to W illiam F. Staats, Louisiana Bankers Associa tion professor of banking at the uni versity. D r. Staats said the heavy dem and for the sem inars reflects the in creasin g ly com p etitiv e environ m ent in which bankers will be op er ating in the years ahead. Information is available from the Banking C e n te r at the C ollege of Business Administration at Louisi ana State University, Baton Rouge, La. While attitudes toward IRAs were essentially positive, a few disadvan tages were cited. Tax laws are unpre dictable, so there is no guarantee that deferring taxes now will mean lower tax payments later, although most par ticipants were willing to concede that law changes would be unlikely. Personal plans call for retirement at different ages. Early retirees would want some income before age 591/2. Interest earned might be greater if the same funds w ere invested in m oney-m arket certificates. A long term at a fixed rate would erode appre ciation over time, particularly if the plan does not allow interest earned to be credited to the principal, at least periodically. A penalty for early withdrawal of six months’ interest and a 10% excise tax on the amount withdrawn seems ex cessive, but when participants were reminded of the intent to preserve funds for retirement, even this barrier to early withdrawal became viewed as less a penalty than a means of protect ing the user from easy access to his funds. The idea of a no-withdrawal penalty after the initial investment term seemed an acceptable modifica tion. Following this discussion, several scenarios with the various options being considered by Third National were presented for consideration by each group. The merits and disadvan tages of each were carefully weighed so product preferences could form the basis for those characteristics that best represented the product capable of stimulating purchase behavior. In accordance with particip an t ideas, feelings and interests, the opti mum product for Third National’s IRA would contain the following provi sions: MID-CONTINENT BANKER for January, 1 9 8 2 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis This Texas Instrument TI-59 compu ter with banking software by Money, Time & Data Management enables banks to handle multitude of computations. That same day a crew of bank com p u ter operators punches the data in to a desktop Texas In stru m e n t co m p u ter, adapted with software m arketed by M oney, Tim e & Data M a n a g e m e n t, I n c ., C h elm sfo rd , Mass. The next day the bank mails an investm ent estim ate based on the figures provided by the prospective custom er. T he analysis also includes instruc tion on how to open an IRA at the bank. According to a spokeswoman in th e bank’s m arketing departm ent, about 100 inquiries cam e in the first w eek the investm ent analysis was offered. It takes less than three m in utes for the analysis to be made and the bank hopes to be able to track any follow-through on the part of prospective custom ers asking for the service. • A short-term 18-month certificate that provides consumers with the pos sibility of short-term liquidity, a fea ture of importance to them because of the uncertainty of the economic cli mate. • A $20-per-month minimum de posit made either individually or by automatic-payroll deduction. • Larger deposits made at any time to permit individuals whose earnings are receiv ed p eriod ically to be 53 accommodated by the plan. • Conversion privileges every time the 18-month certificate matures, with a 10-day grace period. While auto matic rollover is assumed for most accounts, the opportunity for with drawals or reinvestment in other in struments allows for changes in per sonal or economic conditions. • Interest rates tied to Treasury-bill auctions or to money-market funds to offer the customer a competitive rate, thereby encouraging continuance of the account. • Provision for a floor below which interest rates would not fall. While recognized as largely psychological, a floor was felt to be important to cus tomers during periods of falling in terest rates. • No withdrawal penalty after maturing of the first 18-month certifi cate. As the account accum ulates funds, the customer is rewarded with greater management flexibility. • Funds in the account insured to $100,000. Security is an important in ducement, especially for an expected long-term investment. Consumers ex pect all their funds on deposit at banks and S&Ls to be insured to this amount. • A statement issued annually and at certificate maturity. Consumers do not want to be made aware too fre quently of their account balances. In spite of increasing prices, shrink ing dollars and other priorities, these participants are firmly convinced they must help themselves insure their own futures through a regular savings pro gram. In this context, IRAs appear a logical and necessary program for ev ery employed person. • • State Bank Directors Elected by I BAA The following state bank directors have been elected by the Independent Bankers Association of America (IBAA) in Mid-Continent-area states: Arkansas — Amos David, chairman, Caraway Bank/Bank of Im boden, Caraway; Louisiana — L. J. Folse, president/CEO, Terrebonne Bank, Houma; Oklahoma — Jack M. Dickey, president, F irst National, C uster; Texas — Ruben H. Johnson, chairman/CEO, United Bank of Texas, Aus tin. Elections for state representatives to IBAA’s executive council are held annually in one-third of the states in w hich the association has m em bersh ip s. Term s are th ree years; however, Mr. Dickey will serve one year to fill a vacancy. 54 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Loan Policy, Deregulation Discussed A t First Alabama's Bank Forum OAN POLICY, the economy, det regulation and agriculture were all on the agenda of First Alabama Bank of Montgomery’s 35th annual bank forum D ecem ber 9-10. More than 450 bankers from all over the state attended. “No other single area has more im pact on your bank than the lending area,” Lynn H. Mosley, president, First Alabama Bancshares, told his au dience. “In past years, many banks put too much emphasis on growth of their loan portfolios and not on quality growth.” He added that “a written, welldefined loan policy is absolutely neces sary. However, the written policy real ly is only the beginning of the effort to maintain a quality loan portfolio. “We must recognize that a bank can not be all things to all people. We must continue to review and update our written loan policy to be sure it is serv ing the needs of the market and the bank.” He also pointed out that w elltrained people still are the key to a quality loan portfolio. Banking D eregu lation . The phased deregulation of banking was discussed by W ilbur B. Hufham, president, First Alabama Bank. He said that the effect already has been seen in all saver certificates, 30-month certifi cates and the coming changes in indi vidual retirement accounts (IRAs). He then detailed the major changes that were to take place in IRAs January 1. “We no longer can measure corpo rate macho by size alone,” said Mr. Hufham. “We must get back to reality and remember that earning power is L Shown at First Alabama of Montgomery's annual bank forum are (I. to r.): James S. Gaskell Jr., ch./CEO of bank; Ken McCartha, state supt. of banks; John Russell Thomas, ch./pres., First Nat'l, Alex City, Ala., and Lynn H. Mosley, pres., First Ala bama Bancshares. Wilbur Hufham (I.) and Frank A. Plummer are pictured at First Alabama of Montgom ery's annual bank forum in December. Mr. Hufham is bank's pres.; Mr. Plummer, ch./ CEO, First Alabama Bancshares. the key to profits.” He went on to say, “The real source of liquidity for banks in the coming deregulated environment will be de posits. Banks must seek deposits aggressively, but also closely monitor costs.” In his concluding remarks, Mr. Hufham pointed out, “As we move dai ly toward total deregulation in March, 1986, bankers will be challenged not only by other financial institutions, but also by all manner of nonfinancial in stitutions. We cannot afford to be timid. We can and must meet this chal lenge with new and innovative ideas to serve our customers. ” Reg Z C hanges. Upcoming changes in Regulation Z (Truth-in-Lending) were described by Paul E. Norris, the bank’s senior vice president. ‘The changes are a simplification,” he said, “but there will be consider able cost involved due to the necessary training and reprinting of forms. “Every form now in use must be replaced by April 1, 1982, to conform to the new law.” More recently, the date of enactment was moved back to October 1, 1982. Mr. Norris also spoke about some of the specific changes affecting agri cultural credit and treatment of mobile homes under the revised regulation. He cautioned bankers to “not wait un til the last minute to get new forms approved by legal cou nsel and printed.” He concluded, “The new revisions are no utopia, but certainly are a big improvement.” MID-CONTINENT BANKER for January, 1 9 8 2 Hostesses at First Alabama of Montgom ery's annual bank forum last month were (I. to r.): Mrs. James S. Gaskell Jr., wife of bank's ch./CEO; Mrs. Wilbur Hufham, wife of bank's pres., and Mrs. Frank A. Plummer, whose husband is ch./CEO, First Alabama Bancshares. F iscal R esponsibility. “A message was delivered at the polls about a year ago,” said Frank A. Plummer, chairman/CEO, First Alabama Bancshares. “That message was fiscal responsibility.” Calling inflation the nation s No. 1 enemy, he continued, “While there are some favorable trends evident in the fight against inflation, the market place will not change overnight. Fie reminded his audience that before the economy underwent a substantial re covery, “it is inevitable that certain areas of the economy are going to be hurt. In particular, the automobile and housing sectors. We sometimes forget to learn from history. Remember that the alternative to this economic course could be an inflation rate that con tinues to rise uncontrollably. “We must remain alert to our chang ing marketplace.” Noting the increase in dual-income families, he said, We must recognize that the financial needs of this market segment are different from other segments, and we must re spond to those needs.” He advised bankers to quit reacting to change, but, instead, to c r e a te change. To create this change, he con tinued, “W e must continually ask ourselves this question, ‘How can I better serve my customers? ” A gricultu ral E con om y. This past year will go down as one of the most frustrating years that agriculture has witnessed in a long while, said Dr. John C. Gamble, agricultural econo mist, First Alabama Bancshares. He then detailed price fluctuations of several key crops during the past year as an example of the way farmers must try to forward price their products. “Managerial requirements for suc cess in the agricultural sector have changed dramatically in the past 10 years,” Dr. Gamble continued. Com puter-generated pro-forma analysis of agri-production/marketing strategies “ will provide m uch -n eeded riskmanagement tools in coming years,” he predicted. “Today, 20% of farmers are taking home 80% of the profits largely be cause they have developed superior m arket sk ills,” he continued. He urged bankers to use “a little logic, a little reason, and make intelligent financial-management decisions con sistent with your customer’s financial position and his ability to absorb price risk. He concluded by pointing out that if bankers are armed with adequate mar ket intelligence and, most of all, a working desire, “success for you and your agricultural customer likely will be a profitable experience.” • • Kansas State, Wichita, has promoted Ralph Hudson to senior vice president/EDP head, Robert Pestinger and Julie Flynn to assistant vice presidents and Kathy Bassett, Regina Benn, Patty Mock and Gilbert “Barney” Oldfield to assistant cashiers. Elected vice presi dents were Mickey Cowan and Vir ginia Harder. Release Date January 30, 1982 A P r e - P u b l ic a t io n O ffer save 20% Budgeting, Forecasting and Planning A Bank Director’s Manual 248 pgs. $2200 Every bank must know WHERE it is going and HOW to get there! While management should ‘‘map the course,” directors should play a role in establishing and im plementing goals. This manual supplies directors with tools they need in order to steer bank policy in the best direc tion. Chapters discuss establishment-of-mission statements and goals, trace various stages of a planning process. Also outlines many external and internal factors that must be considered. Details HOW to perform financial plan ning, HOW to plan for new ser vices. Explains board’s role in eco nomic forecasting. Discusses basic approaches to gather and best ways to utilize data in formal planning. Forms and worksheets are in cluded covering a vast array of planning aspects. Techniques uti lized by successful banks are in cluded; sources of information are listed, along with a bibliography of references. Save! Send check with order. Price after January 30 ................... $27.50 THE BANK BOARD LETTER 408 Olive St., St. Louis, MO 63102 1 Copy @ $22_______5 or more @ $20 e a:-----------N a m e .................................................................................... T it le ........................ Bank ....................................................................................................................... S tre e t....................................................................................................................... City, State, Zip ..................................................................................................... MID-CONTINENT BANKER for January, 1 9 8 2 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 55 Cloudy Business Skies Seen Until M id-Year By Forecasters at Boatmen's Conference ITTLE improvement in the busi ness sector was seen before mid year by a panel of businessmen ap pearing at the ninth annual businessforecast con feren ce sponsored by Boatmen’s National, St. Louis, last month. Representatives of the chemical, re tail, agricultural, entertainment and banking sectors presented their views on the fortunes of their industries for 1982. Only the entertainment repre sentative was bullish. This will be a tough year for agricul ture, said Charles M. Harper, chairman/CEO, Con Agra, Inc., Omaha. “We re entering the year on the heels of record world grain production, ” he said. “However, production in 1981 was only 2% above the record set in 1978. World grain stocks are projected to increase from 11.8% of usage in mid1981 to 13% in mid-1982, which still is somewhat short of a comfortable level if the world exp erien ces adverse weather.” He predicted that world crop pro duction in 1982 will be slightly below 1981 figures. Export potential will con tinue to feel the effects of the partial embargo of grain to Russia. Sluggish economic growth in Western Europe and Japan and Eastern Europe’s con strained ability to finance imports will be limiting factors for U. S. ag exports. He sees a significant increase in farm exports in 1982, due in large measure to lower prices stimulating demand. By the same token, he said, the in- L https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis By Jim Fabian Senior Editor William H. T. Bush (I.), pres., Boatmen's Nat'l, chats with Wayne Brent, GMI Corp., St. Louis, at recent business forecast confer ence sponsored by Boatmen's Nat'l. crease in sales dollars probably will trail the increase in volume. The near-term domestic outlook for ag producers is a gloomy one, he con tinued. Recession and weak discre tionary income will limit demand for m eat and oth er in co m e-sen sitiv e foods. He expects the Reagan Administra tion’s economic incentives and lower interest rates to have a positive impact on economic growth and demand by mid-1982. He said a good demand base was building for meat products, but that improvement in grain markets will take longer to develop. Export de mand at present is too fragile to sup port much upward price pressure and domestic livestock feeding isn’t profit able enough to stimulate sharply high er grain prices. As a result, he said, the livestock producer may fare better than the grain producer in 1982. “All in all, 1982 is shaping up as another challenging year for U. S. agri culture,” he said. “The most efficient producers will reap some rewards — which won’t be shared by less-efficient farmers and younger farmers who are burdened with debt. Net farm income will be hard pressed to surpass the de pressed levels of 1981 unless the econ omy rebounds faster than expected or competitor exporting nations have se vere crop problems.” He added that consumers will con tinue to see low food prices through at least the early part of 1982. However, that will change later in the year if livestock producers follow through with lower production. Even so, he added, price increases shouldn’t be sharp in 1982. Retail food prices may be up 6% to 8%, the result primarily of higher packaging and distribution costs. Mr. Harper concluded by stating that, although ag faces a tough 1982, he is “excited and bullish about the dec ade of the ’80s. ” Americans may have to get used to the fact that they can never expect to live without uncertainty, said Donald N. Brandin, chairman/CEO, Boat men’s, in his assessment of banking’s prospects for 1982. “It behooves us to adjust our psychological approach to both our personal and business lives — to accept change as inevitable and pre pare for it,” he said. Real GNP growth in 1980 was a minus two tenths of 1%, he said, and 1981 is expected to come in at a lack luster 1%-plus and 1982 is already being forecast as a flat year with negaDonald N. Brandin, ch./CEO, Boatmen's Nat'l, is flanked by two speakers who took part in bank's business-forecast conference last month — Francis T. Vincent Jr. (I.), pres./CEO, Columbia Pictures Industries, and John W. Boyle, ch., May Department Stores. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis This new financial institution in Metairie, La. typifies the extensive experience of HBE Bank Facilities in planning, designing and building. We looked at this project as a direct catalyst for more business for the bank, creating an overall appearance to enhance community image while designing a highly functional facility which will directly affect customer satisfaction with service. Our functional know-how in terms of space utilization, layout, work flow, inter departmental relationships and equipment usage will result in smoother work flow, greater efficiency and a stronger bottom line. We can also advise you in site selection and help you plan for future growth. Our skills have worked in building the bottom line strength of many other banks. Ask for our brochure demonstrating this. Call David Specht at (314) 567-9000. ■8 ■ it m MM tive growth in the first and possibly second quarters. Mr. Brandin predicted a 1% drop in the inflation rate for 1982 — from the 8.5%-9% rate expected for 1981. This will happen only if the Fed controls the money supply effectively. The outlook for interest rates for this year includes some further moderate declines in short-term rates in the next several months, reflecting the reces sion. Although it’s difficult to predict longer-term rates, he said, the pres sure will be on the upside, despite progress on the inflation front. “As the economy starts to recover from the present recession, as ex pected some time in the middle of 1982, credit demands should increase and this, coupled with pent-up long term corporate demand and continued high levels of federal financing, will create a tight market and could start another roller-coaster ride. The Fed’s reaction will be the key determinant. ” The federal government continues to be the major culprit, he added. The Study of A m erican B usiness at Washington University has published figures that indicate the federal gov ernment’s use of available credit has gone from 30% in 1978 and 1979 to 43% in 1980 and 1981. He predicted that the better man aged, better situated banking orga nizations are coping well with com petitive pressures. “While earnings of the industry will vary widely in 1981, the regionals like Boatmen’s should again chalk up good records.’’ He pre dicted an over-all growth rate of 10% for banking in 1982, beginning in the third quarter. Francis T. Vincent Jr., president/ CEO, Columbia Pictures Industries, said he is “guardedly optimistic” for the prospects of the entertainment in dustry in 1982. “The entertainm ent industry has developed to the point at which it now plays an important role in our lives and in the lives of people around the world to whom we export both our nation’s products and ideals. . . . I foresee for the entertainment industry in 1982 a continuation of that development. I foresee the continued integration of the industry’s resources and skills into a relatively small number of multi faceted entertainment conglomerates whose reach will extend across the spectrum of product possibilities and across the age and interest groupings of our potential consumer,” he said. A bleak picture for the chemicals industry was painted by Raymond F. B e n te le , president/C EO , M allinckrodt, In c., which recently has been 58 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis acquired by Avon Products. “The problems of the chemical in dustry are largely the same as they have been for several months: ex tremely poor construction and auto motive markets, sluggish economics overseas and a strong U. S. dollar against certain foreign currencies,” he said. The few brights spots in the industry include the areas of paints, glasscontainer manufacturers, tire makers and some producers of other rubber and plastic products. However, he added, setbacks have pretty much out numbered any gains realized. The outlook for the full year of 1982 is not strong. The problems the che mical industry faces are not likely to disappear quickly. Any recovery dur ing 1982 is not expected until the third quarter. The retail picture was presented by John W. Boyle, chairman, May D e partment Stores Co. He said the cur rent recession caught retailers by sur prise. They are hoping that the final days of 1981 will see sales good enough to make the year profitable. He predicted that the retail industry over the coming years will become slimmer, trimmer, more productive and more profitable. “We intend to participate in what we believe will be strong, economic growth in general and in retailing during the 1980s,” he said. • • ket share without benefit of an asset plan to ensure profitable employment of liabilities. • Winners also made dramatic in creases in non-interest income while losers seemed to ignore this area. • Winners successfully pursued re lationship banking to achieve multi service relationships with customers — they organized around markets. • Losers continued to utilize a com partmentalized structure organized around products. • W inners provided financialadvisory services to help customers manage their financial affairs better and were paid for it. • Losers failed to invest in develop ing systems and expertise to provide advisory services. • Losers made extensive invest m ents in E F T strateg ies. They achieved im pressive technological successes, but unimpressive market ing flops. • Winners used E F T technology successfully to enhance locational con venience and improve customer satis faction in service delivery. They recog nized that E F T was a technological tool and not a strategic goal in and of itself. • W inners priced their services aggressively, preferring to compete on the basis of value. • Losers competed on the basis of price and failed to properly recognize risk in pricing their loans. • Many winners were not banks. They included firms such as Sears, Who W ill Win Merrill Lynch, H & R Block, Pruden (C ontinued fr o m page 15) tial and some S&Ls. • Almost all losers were banks and ness discipline that addressed all com S&Ls. • Winners developed systems to ponents of the m arketing mix — assessment, goal setting and strategies measure and evaluate market/product covering products, distribution, deliv performance. • Losers lacked managerial disci ery, pricing and promotion. • W inners linked marketing and plines to set goals and track perform ance. funds management. • Winners improved productivity • Losers failed to see the rela tionship of marketing to funds manage significantly by increasing efficiency and lowering costs. They replaced in ment. • Losers were not effective in funds flation-prone, labor-intensive costs m anagem ent, and b ecau se they with capital investments in technolo couldn’t manage both sides of the bal gyance sheet, they incurred negative • Losers failed to address the need spreads. to concentrate on improving produc • W inners, recognizing the full tivity. They conducted business as marketplace realities of a non-Reg Q usual. • Losers thought product manage environm ent, took steps to assure profitable margins through use of float ment was only a buzzword or fad. ing rates for their loans. • Winners improved profitability of • Winners profitably matched lia their major financial services through bility categories in terms of cost and installation of active, ongoing productmaturity with appropriate assets. management programs. • Losers blindly followed the lead • Winners invested in people. They ers on pricing liabilities to protect mar worked at attracting and developing MID-CONTINENT BANKER for January, 1 9 8 2 Conover Named C o fC W A S H IN G T O N , D. C. — C. Todd Conover is the new C om ptroller of the C urrency, succeeding John G. H eim ann, who resigned the post last spring. M r. H eim ann re turned to the private sector. Mr. Conover is one of the found ing partners of Edgar, D unn & C o n over, In c., a general m anagem ent con su ltin g firm h ead qu artered in San Francisco. M uch of his consult ing experience has b een with com m ercial banks and other financial in stitutions, such as insurance com panies and cred it card organizations. From 1974-78, he was with the m an agem en t co n su ltin g group of Touche Ross & Co. in San Francisco, w h ere he was a p rin cip al and a national services d irector for bank ing. B efore that, Mr. Conover was vice president/corporate d ev elop m e n t, U. S. B a n c o rp , P o rtla n d , O re. From 1965-72, he was a consul tant with M cK insey & C o ., I n c ., and worked in the firm ’s offices in San F r a n c is c o and A m s te rd a m , th e N etherlands. H e began his business career with S eattle-F irst National as a m anagem ent trainee in 1962. M r. Conover holds a m aster’s d e gree in business adm inistration from the University o f California at B e rk e ley and a bachelor of arts degree from Yale University, New Haven, Conn. high-caliber individuals. • Losers did not pay competitive salaries or invest in training and de veloping their staffs. • Winners were excellent planners at both strategic and tactical levels. They recognized problems in advance and took preventive actions. • Losers were seat-of-the-pantstype planners and had to rely on hastily put-together contingency plans when major problems occurred. • In the final analysis, winners pro duced consistent profits and were able to generate capital internally as well as to acquire outside capital. • Losers had spotty to poor profit performance and could not generate or attract new capital. The result was numerous consolidations within the financial-services industry. The challenge for bankers as I see it is to take this future hindsight and change it any way they like if they don’t agree with me, but to use it to help develop their banks to be winners in the ’80s. They also must realize that all strategic and tactical actions taken by winners in my future-hindsight sce nario had to be based on thoughtful analysis and planning. Therefore, my concluding remarks are: 1. Take a big-picture view of future opportunities and threats. 2. Build your bank’s planning capa bilities to prepare for the future. 3. Strive to help your respective in stitutions to be winners, not losers, in the challenging ’80s. • • ABA Workshop Feb. 7-10 On Telecommunications The impact that deregulation has on future planning for tele co m munications needs at financial in stitutions and the new Fed com munications system, “FRCS 80,” will be discussed at the ABA’s bank tele communications workshop, set for February 7-10 at the Century Plaza Hotel in Los Angeles. Insights into AT&T’s fully sepa rated subsidiary “Baby Bell’’ and its impact on the banking industry will be presented by the keynote speak er, Jam es E . O lson, AT&T vice chairman. The major portion of the first day’s program will be devoted to a series of concurrent and special-interest sessions covering basics of traffic en gineering, network control, Bank Card and its directions, FRCS ’80, WATS and its alternatives, opportu nities in international communica tions, the automated office, network secu rity and planning, budgeting and controlling. The second day’s session will fea ture a general session on deregula tion with a panel discussion covering cu rren t views and issues on the topic. A series of rap sessions will cover such topics as interconnect, rates and regulation, security, deal ing with the local operating firm, staffing and organizing a telecom munications department and systems network architecture distributor pro cessing. Home banking will be discussed by bankers on the third day of the workshop. Among the participants MID-CONTINENT BANKER for January, 1 9 8 2 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis will be Thomas Sudman, president, United American Services, Knox ville. Exhibits will feature telecommun ications and electro n ic banking equipment and information. Leasing Conference Planned on Autos, Personal Products Analysis of leasing provisions of the Economic Recovery Tax Act of 1981 (ERTA) will be a major part of the Con sumer Bankers Association’s second annual au tom obile and personalproduct leasing conference February 22-23 at Nashville’s Hyatt Regency. The CBA describes the conference as an intensive two-day seminar designed to provide both experienced bank les sors and novices with specialized gui dance on establishing and maintaining successful leasing programs. Scheduled is an overview of the leas ing industry, including a look at its history and projections for its future, as well as an update on the Federal Trade Commission’s investigation into leas ing activities, a review of the Fed s proposed commentary on Regulation M— consumer leasing and a discussion of efforts to incorporate leasing into the Uniform Commercial Code. For the leasing novice, a practical, hands-on workshop will address the “how to” of establishing, marketing and operating a successful auto leasing division, including an introduction to the legislativ e and regulatory framework within which bank lessors must operate. For the experienced les sor, the conference will serve as a forum for exchange of ideas with others involved in leasing. Participants will learn new techniques to integrate into their own leasing departments and have the opportunity to compare their programs with others across the coun try, based on a 1981 survey of bank lessors. For further information, contact: Susan Gowin or Deanna Belli, Con sumer Bankers Association, 1300 N. 17th St., Suite 1200, Arlington, VA 22209. New Orleans Bancshares, HC for Bank of New Orleans, was included on the National Association of Securities Dealers Automated Quotations overthe-counter market listing beginning last November 25. The HC’s trading symbol is NOBS. 59 Customers Talk to Bank Via 'Tellus First' Units Lee Gunderson Named New President O f Prochnow Graduate Banking School A BA COUNCIL Chairman Lee E. -Gunderson has been named pres ident of the H erbert V. Prochnow Graduate School of Banking at the University of Wisconsin/Madison. Mr. Gunderson, who is immediate past president of the ABA and president, Bank of Osceola, Wis., is the second banker to head the school, which was founded in 1945. Herbert V. Proch now, a co-founder of the school, had been its only director until his retire ment last September. have been aware of the fine reputation of the school and know, from my per sonal experience as a student, the value of the rigorous and relevant academic program developed by bank ers for bankers. In recent years, as I toured the country, bankers from all areas spoke of the challenge of manag ing their banks to profitably and effec tively serve their customers and their communities in a rapidly changing economic and competitive environ ment. As I see it, the school’s role is to continue to present a course of study that will prepare bankers to meet that challenge, now and in the future. ” • • Expanding Financial Services To Be Explored by ABA At 1982 Trust Conference “The Financial-Services Market: An Explosion of Opportunities” and how bank trust departments can profit from The school is sponsored by 16 state such opportunities will be the focus of bankers associations composing the the ABA’s national trust conference Central States Conference of Bankers February 7-10 at the Hyatt Regency, Associations. Mr. Gunderson was the New Orleans. unanimous choice of a selection com The conference is designed to an mittee made up of bankers, faculty and swer the following questions: What do trustees chaired by Robert C. Nelson, Sears, American Express and National executive vice presid ent, Indiana Steel know about the financial-services Bankers Association. market that trust bankers don’t know? More than 12,000 bankers have Why are these firms and others mov graduated from the school, which had ing aggressively into the traditional an enrollment of more than 1,500 stu preserve of trust banking? How are dents from 44 states, the District of bank trust departments uniquely posi Columbia and Puerto Rico last year. tioned to capture the lion’s share of the The school’s faculty of more than 160 new affluent market for financial ser includes bankers, economists, educa vices? tors and government officials. “Participants . . . will come away Mr. Gunderson already has as better prepared than before to develop sumed his duties as the school’s top and refine marketing strategies for official. His responsibilities include their present customer base, as well as curriculum and faculty development having better ideas for successfully in and chief spokesman in promoting the creasing market share, ” says Joseph L. school’s objectives. M cElroy, conference chairman and Mr. Gunderson graduated from the executive vice president, Manufactur school in 1965. A native of South Dako ers Hanover Trust, New York City. He ta, he attended the University of South also heads the ABA’s trust division. Dakota. He is a past president of the In addition to formal talks, the con Wisconsin Bankers Association and ference will feature a series of work chaired the ABA com m unications shops and special-interest sessions. council from 1972 to 1977. Participants will examine investment Commenting on his new position, strategies, bank mutual funds, sales Mr. Gunderson stated: “I am honored management, new-business opportu to be asked to head the Prochnow nities arising from the Economic Re Graduate School of Banking. In my covery Tax Act of 1981 and latest in nearly 30 years in banking, I always dustry technological developments. 60 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Customers of banks belonging to First Bank System, headquartered in Minneapolis, now can “talk back” to their bank via a device known as the “Tellus Terminal, ” a push-button elec tronic unit for customer use in rating bank services. WILCI5 i J U Li tsas38 r Li »mmm» qumtmisfotm, ‘mhawfteav«*«*! mpuahhutlo« Wh««fm ’mzmwwmmtha for you? p«shthe 'Tellus First' terminal is programmed to ask customers 1 1 questions about various bank-related topics. All questions can be answered in 30 seconds, according to First Bank System, Minneapolis HC, which has 10 machines in use. Distributor is North American Financial Services, Winter Park, Fla. The device enables customers to re spond to 11 questions by pushing the appropriate buttons. It takes no more than 30 seconds. Q uestions pro grammed into the equipment may be changed to gather customer informa tion on use of bank services, advertis ing and marketing, employee perform ance, the bank’s image in the commu nity and strengths and weaknesses of the bank as perceived by customers. The memory module of the device is operated on flashlight batteries and the terminal is lightweight so it can be moved to various locations around the bank — or from one bank location to another. First Banks has 10 of the machines and is circulating them among the 147 offices of the HC’s 92 affiliates in five upper Midwest states. The units usual ly remain in place for three weeks and are expected to be used indefinitely. Questions can be geared to a given bank; therefore, they can be specific. Usage of the machines varies with loca tion and is directly related to en couragement to use them on the part of customer-contact personnel. Responses to questions are con fidential; there’s no way the bank can identify a respondent. MID-CONTINENT BANKER for January, 1 9 8 2 You choose a correspondent bank correspondent banking has for you to adds another 10 years experience because you need and expect the normal profit from. He has to know your to our correspondent banking team. correspondent bank services: fast territory like you do, be aware of your They know the land. They know the check clearing, computer services, special needs and he’s got to be people. They know how to make overline loan participation, securities available when you need him - with correspondent banking with us work safekeeping, investment help and the answer. for you. Ask around. A lot of southern expertise in special banking areas like Jim Montgomery has over 20 years agricultural financing. experience as a correspondent banker But more than that you look directly to in southern Illinois. Bob Heifer has been your banker for help. He’s your personal key to opening the services that a correspondent banker in Illinois and Je rry Brooks are our kind of bankers. Missouri since 1961. Je rry Brooks We think they’re your kind, too! Illinois bankers already know Jim, Bob, and Jerry. Shouldn’t you? Jim Montgomery, Bob Heifer and When you work with a correspondent bank, your correspondent banker is that bank. CORRESPONDENT RANKING DEPARTMENT (618) 834-0080 F IR S T N ATIO N AL BANK O F Main Bank Facility, 19 Public Square, Belleville, Illinois 62222 (618) 234-0020 D e p o sits In su re d to $ 1 0 0 ,0 0 0 by F D IC https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis B E L L E V I L L E the nonbank competitors in banks’ markets, is an anachronism, he said. Structural Change “At the very least,” he stressed, (C ontinued fr o m page 28) “Congress and the regulators must acknow ledge that the fin a n c ia lservices industry — not the commer cial-banking industry — is the real er product options that a truly com com m ercial arena with which we petitive, nationwide banking system should be concerned when we look at would offer. the competitive environment. He cited one area where there are “Indeed, our legislators ought to be opportunities for real progress toward concerned that U. S. com m ercial nationwide banking, and it’s in the banks are being supplanted rapidly by separation of electronic banking — the universal banks of W estern principally automated teller machines Europe and Japan as the dominant (ATMs) — from the issue of branch financial institutions in the world. restriction. He believes a majority of Many are heavyweight contenders bankers might support crossing state with more reach and better defenses lines via ATMs provided they have ac than their U. S. bank competitors. cess to the ATM network. And I must admit to wondering about the desirability of having more and more of our domestic financial struc ture, which underpins so much of our "I don't believe bankers national policy, reliant on institutions should want the money-market responsive to policy requirements of funds stopped; we should seek other nations.” R e g u la t o r y /L e g is la tiv e Im p lic a the authority to offer competi tion s. What can we expect in the fu tive products and services." ture? Mr. Labrecque’s own view is that regulators and legislators won’t allow the U. S. banking system to sink “I do not believe financial institu into a second-rate position in the tions will seek to differentiate them world. He believes the need for im selves through the access m echa mediate action is so compelling that n ism ,” said Mr. L abrecq u e, “but the following steps should be taken rather with the services available soon to redress the imbalances in the through that mechanism. In a period of financial system: 1. Action should be taken to expand general deregulation, banks sharing the same access mechanism will have powers and product capabilities of the opportunity to significantly differ banks; Reg Q should be relaxed fur entiate their products and thereby ther, and banks also should be able to offer certain insurance products. compete.” 2. A m odification of the GlassAt the correspondent bank confer ence, he pointed out this would repre Steagall Act is a definite possibility, sent a significant opportunity for the and a logical first step would be to allow banks to underwrite municipal correspondent-banking business. R efining Antitrust R egu lation s. If revenue bonds, to be followed by leg banks are to become fully competitive islation to underwrite some kinds of with nonbank competitors, he con domestic corporate-debt issues. tinued, serious consideration must be Fu rth erm ore, he continued, he given to applying the new market would not be surprised to see the realities to outmoded and antiquated Douglas Amendment repealed or dra notions of antitrust policy, especially matically modified. A repeal of Doug as they relate to banks. At present, he las, according to Mr. Labrecq u e, pointed out, giant foreign banks are would encourage value-added merg allowed — with virtually no effective ers of banks with com plem entary opposition — to purchase major Amer strategies and skills throughout the ican banks. He cited this example: In country. It would give shareholders California, six of the 10 largest banks the widest range of value for their holdings. are foreign owned. What of American banks, he asked, Moreover, he said, if the banking and answered that they are blocked industry is to meet the competitive from merging with other institutions challenge before it, it will require because competitiveness in banking financial strength, product diversity, always has been measured by looking excellence in service and technology at a particular bank’s share of the com and geographic reach. All these qual m ercial-ban k m arket. Such an ities, in his opinion, could be en approach now, especially in light of all hanced through strategic mergers. 62 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Within limits, he added, they will be come an increasingly attractive prop osition for banks of all sizes. “However,” he continued, “I don’t think mergers would mean, as some have suggested, that small banks would be ‘gobbled up’ against their will by big banks. A small bank that serves its market niche effectively can remain successful, as many are in to day s volatile economic and regulatory environment. Furthermore, no large money-center bank, in my judgment, has the human resources, let alone financial resources, to take over the financial-services industry. Repeal of Douglas would encourage a pooling of resources, both in terms of ownership and in terms of management focus. It would be not only desirable, but " . . . I don't think mergers would mean . . . that small banks would be 'gobbled up' against their will by big banks. A small bank that serves its market niche effectively can re main successful." essential, for national-bank holding companies to have knowledgeable and market-independent operating man agement in the various locations in which they would operate. “Our business critically depends on people. Successful mergers will bring together institutions and management that recognize the strengths and mutual benefits that stem from a pro ductive pooling of resources. ” Conclusion. Mr. Labrecque said he realizes there is no consensus of bank ers on subjects he has discussed. Yet, he warned, bankers’ compelling, com mon interests have got to be greater than their differences. To compete effectively in the 1980s, he recom m ended that a ll banks be given broadened powers and scope. “Together, we can hasten change,” he concluded. “I f we don’t work together, we will obstruct change. How the nation resolves this issue will bear significantly on the future of banks, all users of financial services and on the ultimate strength of the U. S. financial system in the world at large.” • • MID-CONTINENT BANKER for January, 1 9 8 2 Consider Selling Banks Now, Community Bankers Are Told mine the price of the community-bank stock as well as the price of publicly traded bank stock. Most emphasis of community-bank-sales analysis, he went on, is placed on the seller side of the transaction. He said his “Acquisi tion-Impact Index” measures the stock market’s reaction to a publicly traded buyer’s acquisition of a community bank with respect to the price paid for the bank. In community-bank-seller strategy, Mr. Swords advised, cash transactions should be considered in lower price/ equity ratio sales and stock-swap trans actions should be considered in higher price/equity ratio sales. • • OW is a good time to consider they can’t sit still and let nonbanks take selling a bank, those attending business away from them. the recent Bank Administration InstiD uring his p resen tatio n , Mr. tute convention in Honolulu were Swords described two innovative tools told. Why? Because of the current he said his firm designed to help bank analysts and researchers interpret high value of community-bank stocks. So said M. J. Swords, president, bank-market activity. He calls them Swords Associates, Inc., Kansas City the “ Com m unity Ban k-Stock-V al professional banking consultant firm. uation Index” and the “AcquisitionHe further pointed out that on aver Impact Index.” In regard to the valuation index, Mr. age, the market is good for control Swords said an analysis of a commun Manufacturers Hanover Consumer sales of banks. Services, Inc., a subsidiary of Manu “The reason community bankers ity-bank sale traditionally has been should be thinking of selling is that oriented toward the price/equity or facturers Hanover Corp., has agreed throughout 1981, their price trends price/earnings ratio of a sale. The trou to acquire about $15 million of con have been upward,” continued Mr. ble with this approach, he told his au sumer-finance receivables and other Swords. “This has been a result of the dience, is that the sales price is un assets of Indiana Financial, Inc., con sumer finance subsidiary of Bank of high acquisition activity of bank hold necessarily divided into two parts, with no consideration given to per Indiana, Gary. Indiana Financial’s 10 ing companies (BHCs).” He said BH Cs’ increased demand formance of publicly traded bank com offices, receivables and specified other for community banks has created a panies. He believes his “Community- assets would become part of Manufac seller’s market, and BHCs also have Bank-Stock-Valuation Index” solves turers Hanover Consumer Services, subject to regulatory approval, joining sparked high prices for individual both of these problems. Turning to his “Acquisition-Impact 10 existing Manufacturers Hanover buyers of community banks. Mr. Swords traced these BHC activ Index,” he said market forces deter Consumer Services offices in the state. ities to loosening of Fed guidelines in 1979. He said that previously, the Fed took two steps to decrease activities: In 1974, it tightened requirements for BH C acquisitions and, in 1977 — through its acquisition-debt guidelines — imposed a type of “margin” require ment to buy a controlling interest in a bank. When the Fed eased the acquisi tion-debt requirements in 1979, he said, it stimulated a tremendous burst of activity because of pent-up demand. Now, he continued, with so many BHCs interested in acquisitions, com munity banks are in better positions to ask for higher prices. Another reason for BH Cs’ height ened activity in acquisitions, according to Mr. Swords, is their anticipation of interstate banking. “If the problem of the ‘states-rights’ issue is resolved,” he predicted, “in terstate banking will be permitted in the future.” The KC bank consultant tried to sof Call Wilbur Hufham, President of First Alabama ten many community bankers’ concern Bank of Montgomery. over increasing competition from large companies seeking to enter the finan For your correspondent needs, 2 0 5 / 832-8218. cial-service field. He admitted that Personal Banking From Professionals. while the impact of such competition on community-bank prices could be significant at first, those banks can less en the impact of such competition with # of Montgomery Na Member FDIC aggressive marketing of their services. He warned community bankers that N MID-CONTINENT BANKER for January, 1 9 8 2 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis R, ER'S :R. H is t A la b a m a Bank 63 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Banks' Unusual Promotions Boost Employee Participation In United Way Campaigns WO BANKS in the M id-Con tinent area held special promo tions in connection with their most cent United Way campaigns and, as a result, increased their employees’ con tributions. Third National, Nashville, chose Be a Real Hero” as the theme for its United Way fund drive and commis sioned Senior Vice President Gayle Gupton to personify the “hero” charac ter. In Houston, Fannin Bank, offered its employees an opportunity to be chosen as a “Millionaire Philanthro pist” who gives one day’s interest on $1 million to the United Way agency the winning employee chooses. “A R eal H ero .” At Third National of Nashville, after an appropriate fanfare at the kick-off breakfast for bank offi cers, “hero” Gupton crashed through a “brick” wall (constructed of styrofoam blocks), handed out lapel stickers and then became serious and stressed the importance of the campaign and the good done by United Way. By the way, Mr. Gupton was appropriately dressed for his hero role in Supermanstyle cape, tights, etc. T TOP: Gayle Gupton, s.v.p., Third Nat'l, Nashville, strikes appropriately heroic pose at officers' breakfast held to kick off United Way fund drive for 1981-82. Mr. Gupton was symbol of bank's "Be a Real Hero" United Way campaign. SECOND FROM TOP: Mr. Gupton, speaking at United Way kickoff breakfast at bank, brings smiles to (from I.): Charles Cook, pres.; Gene Southwood, v. ch., and Charles Kane, ch./CEO. SECOND FROM BOTTOM: Susan Harrison of accounting dept., Fannin Bank, Houston, receives 500 crisp new dollar bills — 18% interest on $1 million — which she desig nated for Center for Retarded in bank's "Millionaire Philanthropist" campaign in connection with United Way campaign. Miss Harrison and Ernest Deal, bank pres., are shown with money bags representing millionaire-for-day's bank account. BOTTOM: This quintet seems to be enjoying super banana split Dennis Young (c.) cre ated for himself at Fannin Bank of Hous ton's ice cream party held to introduce latest United Way campaign. Taking sam ples are: Susan Morgen, Steve Shepherd, Blanca Cipriano and John McClellan. He also stood on a street corner “in uniform” to hand out “Be a Real Hero” re lapel stickers to downtown office work ers as they arrived for work on the campaign’s opening day. Meanwhile, Third National set up a four-by-eight-foot jigsaw puzzle on the main banking floor of its downtown office and tracked the campaign’s prog ress by completing pieces of the puzzle to correspond with the percentage of the United Way goal achieved. Did the strategy work? The bank thinks so because it increased its con tributions by 18% over the previous year, achieved 88% employee par ticipation and attained 100% of its goal. Gayle Gupton, Third Nat'l of Nashville's "super hero," circulates among crowd at United Way kickoff breakfast. He stimu lated laughter — and excellent participa tion — in drive. “M illio n a ir e P h ila n t h r o p is t .” H ere’s how the “Millionaire Philan thropist” program worked at Hous ton’s Fannin Bank: Each employee who contributed to the United Way campaign was eligible to have his or her name in a drawing, the winner of which then could give one day’s in terest on $1 million to the United Way agency that had the most special mean ing for the employee. The interest amounted to $500, figured at an 18% prime rate. The winner, Susan Harrison of the bank’s accounting department, chose the Center for the Retarded because she has a three-year-old retarded niece who will benefit from the gift. Fannin Bank’s employee campaign began with a two-day “banana-split” bash, where various flavors of ice cream and assorted trimmings were MID-CONTINENT BANKER for January, 1 9 8 2 P O N T JU S T R EA D T H E B O O K O N A S S E T / L IA B IL IT Y M A N A G E M E N T . T A LK T O T H E M AN W HO W R O TE I T - JIM B A K E R . For over a decade, Jim Baker has been speaking and writing about asset/liability and investment management. As a seasoned professional and head of his own investment firm, he does a lot more than lecture and write. But when the ABA asked him to do a book on the subject, Dr. Baker answered their request by writing A s s e t/L ia b ility M anagem ent. The publication is now off the press. But don’t just read it. Talk with the man who wrote it — or any one of his asset/liability and investment management experts who are currently putting their nationallyrecognized expertise to work for more than 300 banks from coast to coast. The Baker Rate Sensitivity Volume Analysis, Earnings Impact, Annual Plan, and Monthly Board Reports can help you operate more productively. You’ll also profit from their written Asset/Liability Management and Investment Policies. Baker & Company can produce any or all of these reports and policies, but that’s not all. They also provide valuable interpretations, recommen dations, and timely investment advice. So if you’re looking for asset/liability and invest ment management help, remember that Jim Baker wrote the book — and that’s no figure of speech! For more information on the services offered by James Baker & Company, call (405) 236-2663. Or, if you prefer, mail the coupon below. Please contact me on the services offered by James Baker & Company. Name:________________________________________________________________ —-----------------------Title:__________________________________________________________________ ________________ Bank:____________________________________________________________ ____________________ Address:______________________________________________________________________________ — City and State:__________________________________________Zip:-------------------------------------------------Telephone No______________________________________________________ ____________________ James Baker & Company <§>Investment Bankers SUITE 1050 CITY CENTER BUILDING MID-CONTINENT BANKER for January, 1 9 8 2 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis O KLAHOMA CITY, OK 73102 (4 0 5 )2 3 6 -2 6 6 3 ^ K îp r 65 available. At this informal party, held in the bank’s Criterion Club dining room, all employees were divided into groups. United Way and bank person nel met with each group for a discus sion about United Way and its value to the community. Employees picked up their pledge cards at the party. The opportunity to become a “Mil lionaire Philanthropist’ was an nounced at staff meetings and publi cized in the bank’s employee newslet ter, “Rapping Paper.’’ Culver Turlington, vice president/ Illinois Bank Sponsors 'Runs' For United W ay Cam paign ECAUSE of the declining econ omy, Springfield Marine Bank — as a leading corporate citizen anticipated last August that the annual United Way campaign would have dif ficulty in reaching its $2-million goal. In addition to the bank’s already strong support of the United Way, the bank’s marketing department pro posed an event to focus community wide attention on the United Way fund drive as it was coming to a close. Springfield Marine’s marketing peo ple, recognizing the extreme popular ity of the sport of running and the opportunity for a broad-based involve ment this sport allows, conceived the “Run for the Money,” a 10-kilometer footrace, and the “Fun Run Relay.” To produce the “ Run for the Money” as an authentic 10-kilometer race, the bank sought the help of the Springfield Road Runners. This group provided trained volunteers to mea sure the course and provide advanced technical assistance. An entry fee of $5 per person, payable to the United Way, was set. As in most county seats and state capitals, the Springfield area has an abundance of elected officials and pro fessionals, as well as successful busi B ness establishments. According to the bank, such people and businesses — could easily make added contributions to the United Way, given an event that allowed personal, professional and business exposure. With this in mind, the bank designed the “Fun Run Re lay” for four-member teams, each con tributing $150 to the charity. The relay was a lighthearted way to involve many people not in condition to run 6.2 miles. In late August, letters were sent to preselected community leaders an nouncing the event and requesting sponsorship of relay teams. A logo was designed, brochures produced and mailing lists of runners secured. The first mailing of 3,000 brochures went out early in September. A local radio station was asked to cosponsor the event in exchange for promotional air time. Area distributors of Miller’s beer and Pepsi Cola responded to the bank’s request for donations of their products. Two community business men donated hogs to be converted into barbecue sandwiches. These refresh ments were sold on race day, with all proceeds going to the United Way. Requests for assistance from the mayor s office, traffic engineering and Participants in Springfield (III.) Marine Bank's "Run for Money" line up in front of bank before taking off. Proceeds of event w ent to United W ay fund drive. 66 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis marketing director of the bank and the bank’s United Way chairman, reports the “Millionaire Philanthropist cam paign was a success. Employee dona tions increased 74% over last year’s totals as of this writing, and donations were still to come in. • • the city’s police department resulted in enthusiastic cooperation. The race was publicized via numer ous newspaper articles, including an editorial. Billboards and two printed ads, along with public-service an nouncements on radio and TV, pre ceded the event. A final mailing to prime prospects suggesting clever team names generated numerous re quests to extend the registration dead line. On race day, 350 runners and 53 relay teams showed up, along with 2,000 to 3,000 spectators. Among the relay teams were: Hennessey Florist’s “Creeping Phlox” passing a lavender lei; St. John’s Hospital’s “Delivery Team” in surgical fatigues passing baby dolls; a record-breaking 23person “Human Centipede” and the “Springfield Spoke Jockeys,” the local wheelchair basketball players. Several United Way agencies were repre sented by relay teams sponsored by area businesses. Trophies were presented, special awards given, and the enthusiastic crowd enjoyed an exhilarating, funfilled day. However, as the bank points out, the real winners are the hundreds of clients served by the 21 United Way agencies. The Marine Bank “Run for the Money”/“Fun Run Relay” raised more than $10,000 for these agencies. According to a bank spokesman, its prize could not be measured. The visability and goodwill reached far beyond its defined market area, evidenced by the crowd’s enthusiastic participation. TV news and front-page newspaper photos, the spokesman continues, are worth far more than the cost of under writing the event. She adds that before the afternoon was over, the bank already was planning the “Run for the Money 1982.” • • • B arclaysA m erican Business/ Credit, Kenneth J. Joerres has been prom oted to regional vice president/manager of loan administration and Jim Goetz has been appointed loan officer, both in the Midwest Service C en ter, Milwaukee. Mr. Joerres joined the firm in 1968; Mr. Goetz is new to the firm. The Midwest Service Center serves Indiana, Kentucky, Missouri, Illinois and a portion of Kan sas, in addition to other states. MID-CONTINENT BANKER for January, 1 9 8 2 Walter E. Heller & Company, 105 W. Adams St., Chicago, III. 60603. Other off ces in New York • Montclair, NJ • Boston » Philadelphia • Baltimore Syracuse • Minneapolis • Detroit • Grand Rapids • Cleveland • Kansas City • Denver • Atlanta • Charlotte • Miami • Tampa • Birmingham Columbia, S.C. • New Or eans « Houston • Dallas • San Antonio • Phoenix • Tucson • Albuquerque • El Paso • Salt Lake City • Los Angeles Newport Beach, CA • San Francisco • Portland • Seattle • Spokane • Boise • San Juan, P.R. Heller services are also available in Canada and twenty-three other countries around the world. MID-CONTINENT BANKER for January, 1 9 8 2 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 67 Rogers (Continued from page 17) across state lines. There are only 500 “ Fortune 5 0 0 ” com panies to go around, so the next foray for banks will be the launching of aggressive pro grams to reach quality middle-market companies. These companies will be offered advantages that historically have been reserved for their much larger brethren. This will lead regional banks to be defensive in their markets and to seek more protected areas. I think you’ll see them gravitating down to the lower middle-m arket companies. And I think you’ll find some of the moneycenter banks quite active in this mar ket, too. Finally, a few major banks and many new nonbank competitors are invading the community banks’ retail markets. The most extensive competition will be highly automated and intensely price-competitive. All this suggests that margins will be narrowed because of increased com petition. The two benchmarks of suc cess will be delivering quality services economically and putting an emphasis on fee income. Intelligent costing and pricing are going to be much more necessary than in the past. These trends will take their toll, and not every bank will be successful. The advantages of increased size will be more pronounced. It will lead to more mergers and larger units. No doubt we re some years away from national banking organizations, entirely free of geographic constraints. But we never theless will see a significant erosion of the traditional geographic boundaries and substantially larger organizations pursuing these expanded markets. In order to command capital from investors, banks have learned they have to make their capital more pro ductive. As a result, they are looking closely at available markets and asking questions. First, where can they be viable and effective? And second, where can reasonable profits and margins be earned? To use the current buzzword, they’re “segmenting” their markets. They’re looking for their niches. With few exceptions, this process of segmentation will leave banks with less than a full arsenal of services. Some have already concluded that re tail banking is a risky business to be in and have curtailed services there. The reasoning is that it is crucial to match the interest sensitivity of assets and liabilities. Since retail assets are largely fixed-rate, they present a prob lem. It’s difficult to find fault with that line of reasoning if we assume that in flation and interest-rate volatility will continue. Christmas Display Is 'G ift to Young' This $50,000 Christmas display was featured by Fourth Nat'l, Wichita, in its nine-story glass-enclosed courtyard last month. The display, which viewers could w alk through, was more than 30 feet high and includes approximately 20 animations. The display was a gift to the young and the young-at-heart of Kansas from the bank, a spokesman said. It is said to be the largest indoor seasonal exhibit ever mounted in Kansas and is expected to become a tradition at the bank. 68 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis During the next decade, more and more banks will be examining their markets and selecting those in which they feel they have an opportunity to assert strength — to remain in and not be driven out by larger banks or other financial institutions. A banker today has to look beyond the banking arena. What we currently call banking involves two basic func tions: processing transactions and in termediating credit. At one time, we had a virtual monopoly in these areas. In 1948, banks controlled 63% of the financial assets of this country. That figure has shrunk over the years to less than 30% today. Virtually anybody can look like a bank today, though he can’t call himself a bank. For example, Prudential is offering corporate cash m anagem ent, and m oney-m arket funds are in the deposit business. The individual bank will of necessity be more competitive, but in fewer markets. And the industry will con tinue to lose ground to favored and non-regulated competitors. As for maintaining our monopolies of the past, we’ve lost that battle already. Customer changes will require new marketing techniques. Not only have our competitors changed, but so have our customers. The individual custom er is better educated and more com fortable with technology. H e’s less future-income oriented than his predecessor. He’s living for now, not leaving idle deposits in com mercial banks. Money-market funds have given him a taste of market rates and he’s unlikely to accept Reg Q ceil ings in the future. The corporate custom er also is smarter. With interest rates hitting 20% and more at times, corporations have become adept at managing cash — cash that used to appear in banks as free deposits. To achieve success in this new world, banks will have to create new marketing techniques — techniques specifically geared to the markets chosen. That’s a major challenge facing every banker today. The specialized markets we re talk ing about will not ordinarily be sus ceptible to mass-media support be cause of the expense involved. There’s too much wasted audience. So some of the marketing experts will need to find more effective ways to employ direct mail. Technology’s role will expand. The use of cable TV in marketing services looks promising. As the cost of homedish antennas continues to drop, opportunities to deliver our services (Continued on page 70) MID-CONTINENT BANKER for January, 1 9 8 2 Mr. B an k President, ■ -m j 1 ' left that are ■ ' u- :4 »r; Ü wmm The Ecom computer system for banks is one. t total bank control. A computer system designed iv ¿or banks, by bankers. With sophisticated reporting es 5, yet ease of operation, ail communications are * in simple English. As an Authorized Digital Computer * Distributor we can give you the best of two worlds: hardware from Digital Equipment Corporation, the leading manufac$ turer of interactive computer system s; and application software and services from Emin Systems, Inc. Contact Dennis J . Davis, Ecom System s, Inc., 2 5 0 0 ^ M t Moriah Road, Suite 245, Memphis, - TN 38li5, (901) 794-5501.^M E C O M SYSTEMS, INCORPORATED V C : MID-CONTINENT BANKER for January, 1 9 8 2 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis -' authorized warn 69 directly into the home will multiply. The question becomes one of finding ways to get the customer to use these services. The products we must develop and sell to succeed in this new world fre quently will be technology-oriented. So marketers must become comfort able with technology and its unique vocabulary. We must understand the opportunities and the limits. We must have better managers to cope with greater competition and lowered margins. That will call for sig nificant improvement in training. It also will involve increased use of per sonal selling efforts. A major challenge will be development of effective man agement skills in product design and implementation and cost controls. And, as key people move from train ing into positions of responsibility, compensation programs will have to be changed. If we are to keep these peo ple, their compensation will have to be more reflective of their profit contribu tions. I expect to see some innovative compensation programs to address this need. We must also focus more effectively on asset/liability management. Our in dustry has for a number of years ex perienced a decline in core deposits — personal checking and savings accounts. A corollary is a steady in crease in purchased money. As part of that, we’ve seen the traditional em phasis on asset management — looking after loans and investments — cede much attention to liability manage ment; perhaps too much in recent years. But attention now has come full cir cle. W e’re realizing that we have to look at both sides of the balance sheet. The great concern has become how to match assets and liabilities in combina tions that will ensure margins and pre serve essential liquidity. One thing is sure: Both asset and liability strategies will be greatly formalized in most banks. As we find ways to do this, the growth in non-interest expense will become the most sensitive cost any bank has. A great deal of our energy in the years immediately ahead will be devoted to finding ways to control non interest expense — chiefly compensa tion, occupancy costs, equipment ex pense and costs of developing and marketing services. I see no way to avoid this reality. Beyond market concerns, a new phenomenon has dictated new policies and attitudes on the part of banks. Thirty years ago, the overriding con cern was conservation of assets and 70 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis production of acceptable income. The social problems of the last 30 years and the changing attitudes to ward the obligations of business have been broadened so that most banks now have set social goals to benefit their communities. They face not only the requirements of equal opportunity in all its aspects, but the additional obligation to justify their existence as quasi-public institutions through reinvestment in the community. This latter objective often is in con flict with the traditional objectives of keeping asset quality high, conserving capital and producing profits. But in the future, it will be necessary to rec oncile these competing demands, or to compromise the conflicts in a manner that regulators, shareholders and the public can understand and accept. Bank marketing groups will bear the major communications responsibilities to gain this necessary acceptance from the broadened group of stockholders. The environment I’ve described — more competition, market segmenta tion, changes in our customers, new marketing techniques, people de velopment, asset/liability manage ment and societal obligations — prom ises great challenges to banking profes sionals. • • Haines (Continued from page 18) be they small or large, rural or urban, should have the opportunity to com pete with those institutions that today are unregulated. Public officials and elected repre sentatives at both the federal and state level must acknowledge the competi tive inequities that exist and resist the pressures of special-interest groups who oppose change. Every banker should enjoy playing on a level field whose sidelines have been widened to permit innovative new offenses. • • Credit Conference Is Set For Los Angeles March 7-9 WASHINGTON, D. C. — Robert T. McNamar, deputy secretary of the Treasury, and James V. Baker, presi dent, James Baker & Co., Oklahoma City, are among the speakers who will appear at the ABA’s national credit conference March 7-9 at the Century Plaza Hotel, Los Angeles. Keynote speakers will be Robert T. Parry, executive vice president/chief economist, Security Pacific Corp., Los McNAMAR BAKER Angeles, and John B. M. Place, presi dent, Crocker Bank, Los Angeles. Mr. Parry’s topic will be “The Economic Environment” and Mr. Place will re view “The Com petitive Environ ment.” Asset/liability management and its implications for commercial lenders will be featured on the program. Mr. Baker will provide an overview which will be followed by concurrent work shops organized by bank-deposit size. Also on tap for the conference will be a discussion of loan pricing prac tices, sessions on asset-based lending, bankruptcy, project financing and standby letters of credit, a panel on loan quality, a talk on practical approaches to marketing credit and non-credit services and a presentation on “Attracting, Retaining and Com pensating Loan Officers.” Information and registration mate rials are available from Sharon McGin nis at the ABA, 1120 Connecticut Ave nue, N. W ., Washington, DC 20036. Letters (Continued from page 4) default and legal action, the borrower’s attorney would be looking for any weak point available. The variable-rate loan provides him many opportunities. In conclusion then, I would have to say that while the new law is not the best law, it accomplishes the purpose desired. Usury ceilings are gone, bankers can negotiate realistic loan arrangem ents with borrow ers. However, in the case of variable-rate loans, move with caution. Sincerely yours, D o n a l d X. M u r r a y Vice President/General Counsel Illinois Bankers Association Chicago MID-CONTINENT BANKER for January, 1 9 8 2 Help Stamp Out Director Liability Risk With These Board-Related Manuals CORPORATE ETHICS ...W h a t Every Director Should Know. $23.00 Society is demanding more disclosure from all businesses, including banking. Thus, bankers literally are forced to re-exam ine policies on types of information that can be disclosed publicly. The board's disclosure policy can be a major factor in the public's judgment of a bank. The fact that a bank is willing to discuss . . . or make public . . . any of its actions w ill encourage high stan dards of conduct by the bank staff. This manual (over 200 pages) w ill help directors probe "grey” areas of business conduct so that directors can establish written codes for their own bank. The Effective Board Audit $23 r Conflicts of Interest What Every Director Should Know About r Director? and Officers of Financial It CORPORATE ETHICS RISK MANAGEMENT BANK BOARD $19 LOAN POLICY $ 17.50 QUANTITY PRICES 2 - 5 copies — $21.00 ea. 6 - 10 copies — $19.50 ea. BOARD POLICY ON RISK MANAGE MENT. $17.50 This 160-page manual provides the vital information a board needs to formulate a system to recog nize insurable and uninsurable risks and evaluate and provide for them. In cluded are an insurance guideline and checklists to identify and protect direc tors against various risks. Bonus fea ture: A model board policy of risk management adaptable to the unique situations at any bank. Every member of your bank's board should have a copy! THE BANK BOARD AND LOAN POLICY. $12.00 (Fourth Edition) Recently o ff the press! This revised and expanded manual enables directors to be a step ahead of bank regulators by providing current loan and credit p oli cies of numerous well-managed banks. These policies, adaptable to any bank situation, can aid your bank in estab lishing broad guidelines for lending officers. Bonus feature: Loan policy of one of the nation's major banks, loaded with ideas for your bank! Remember: A written loan policy can protect direc tors from lawsuits arising from failure to establish sound lending policies! Order enough copies for all your direc tors! QUANTITY PRICES 2 - 5 copies — $15.50 ea. 6 - 10 copies — $14.50 ea. THE EFFECTIVE BOARD AUDIT. $19.00 This 184-page manual provides comprehensive information about the directors' audit function. It outlines board participation, selection of an audit committee and the magnitude of the audit. It provides guidelines for an audit committee, deals with social re sponsibility and gives insights on en gaging an outside auditor. It includes checklists for social responsibilities audits, audit engagement letters and bank audits. No director can afford to be w ithout a copy! QUANTITY PRICES 2 - 5 copies — $17.00 ea. 6 - 10 copies — $16.00 ea. QUANTITY PRICES 2 - 5 copies — $10.00 ea. 6 - 10 copies — $9.50 ea. $12 CONFLICTS OF INTEREST. $12.00 (Third Edition) Conflicts of Interests presents everything directors and o ffi cers should know about the problem of "conflicts.” Itgivesexaminers'views of directors' business relationships with the bank, examines ethical pitfalls in volving conflicts and details positive actions for reducing the potential for conflicts. Also included is the Comp troller's ruling on statements of busi ness interests and sample conflict-ofinterest policies in use by other banks which can be adapted by your board. QUANTITY PRICES 2 - 5 copies — $10.00 ea. 6 - 1 0 copies — $9.50 ea. THE BANK BOARD LETTER 408 Olive St., St. Louis, MO 63102 .........copies, Board Policy on Risk Management .........copies, The Effective Board A udit .........copies, Bank Board & Loan Policy .........copies, Conflict of Interest .........copies, Corporate Ethics Total Enclosed $ $ $ $ $ $ Name ..........................................................................................Title Bank................................................................................................... Street ................................................................................................. City, State, Z ip ................................................................................. (Please send check with order. In Missouri, add 4.6% tax.) fc » " MID-CONTINENT BANKER for January, 1 9 8 2 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 71 N ew s A b o u t B a n k s a n d B a n k e rs Alabam a First National, Mobile, has appointed Ronald W. Eastburn assistant vice president/manager, product develop ment in the marketing division and promoted Winifred R. O’Neal to assis tant personnel officer. The 19 affiliate banks of AmSouth B ancorp ., Birm ingham , will be merged into one bank with combined assets of $2.7 billion following approval of the boards of each affiliate. The merger is expected to be completed within 12 to 18 months. The resulting bank will have 102 offices throughout the state. F irst N ational, Birmingham, has promoted Jeb S. Cloyd, vice presi dent, to assistant manager/bond de partment, Susan S. Milewicz to assis tant vice president and J. Ann Petrey to bond investment officer. Central Bank of the South is the name of the new bank resulting from the merger of the 10 affiliate banks of Cen tral Bancshares of the South, Inc., Birmingham. The year-end 1981 merger resulted in a bank with $2.1 billion in assets with 75 offices in 40 communities. Lounell Usry has been promoted from vice president to senior vice president at Farmers & Merchants Bank, Cen tre. Mrs. Usry, who has spent her en tire career at the bank, is past chair man, North Alabama Group, National Association of Bank Women. was with Pulaski Bank, Little Rock, and, prior to that, was with the Arkan sas State Bank Department. The Fed has approved applications of First Fordyce Bancshares to acquire First National, Fordyce, and Brinkley Bancshares to acquire Bank of Brinkley. Illinois Arkansas Worthen Bank, Little Rock, has pro moted James West, Richard Cheever and James Walker to assistant vice presidents; Holly Eddins to assistant cashier and Carol Hardwick to trust officer. Mr. West is loan review man ager in the credit department and Messrs. Cheever and Walker are systems/programming managers. Miss Eddins is manager of Moneycard op erations and Mrs. Hardwick is man ager of the employee benefits depart ment in the trust division. James E. Brantley has joined Farmers Bank, Clarksville, as senior vice presi dent in charge of lending. He formerly Continental Bank, Chicago, has elected John E. Porta and Caren L. Reed executive vice presidents. Both were senior vice presidents. Mr. Porta heads the multinational banking ser- PORTA REED Got people or job problems? The Midwest, Southwest and Rocky Mountain areas are dynamic growth areas. The personnel needs for this region’s financial institutions are vast. Financial Placements has earned the trust and confidence of hundreds of financial institutions and executives throughout the area. We can help you find the right person for that important job opening. Put us to work for you. Call or write today for our fee schedule and guarantee. In our fourteenth year of serving the region’s financial institution personnel needs. FINANCIAL A division ol Bank News 912 Baltimore Avenue. Kansas City. Missouri 64105/816-421-7941 72 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Tom Chenoweth Tom Cannon MID-CONTINENT BANKER for January, 1 9 8 2 vice department and joined the bank in 1974. Mr. Reed heads the financial services department and has been with Continental since 1956. Promoted to vice presidents were Sharon A. Bond, Michael A. Crowe, Robert B. Evans, Roger F. Farleigh, Edward J. Halle and Paul F. Fawless — trust/investment services; Paul W. Boltz and Alan G. Jirkovsky — bond/treasury ser vices; James M. Karis, William J. Mos er Jr. and Don A. Resler — financial services; Mary P. Cloonan and Neile H. Coe Jr. — general banking ser vices; Ronald F. Sapiro — internation al banking services; Nancy F. Kosobud — multinational banking services; Michael B. King — special industries department; J. Michael Baird and Jef fery M. Harbour— U. S. banking de partment; Evan F. Evans — corporate personnel services; William F. Ander son, William F. Walton and Kent E. W esterbeck — operations/management services; and Terry F. Francl and Daniel S. Shook — corporate financial services. IBA Sets Up Meeting O f Various Groups As Step Toward Unity In an effort to unify the various banking factions, the Illinois Bankers Association will hold a congress of all banking organizations in the state January 28-29 at the Marriott Pavil ion in downtown St. Fouis. Those invited include leadership families of the IBA, Independent Community Bankers of Illinois (ICBI) and Association for Modern Banking in Illinois (AMBI), repre sentatives of national-level associa tions, CEOs of money-center banks in Chicago and St. Louis and Fed directors in those two cities. The m eeting will be called a “Banking Issues Congress,” says IBA president James A. Fitch,' president, South Chicago Savings Bank. On the agenda will be critical banking issues of the day. According to Mr. Fitch, the IBA is soliciting many view points to establish common ground in a rapidly changing banking en vironment. IBA E xecu tiv e Vice President William J. Hocter says, “Topics to be discussed at the congress will in clude federal legislative and regula tory issues and state legislative issues. We have invited a number of prominent speakers, including Mur ray Weidenbaum, chairman, Presi dent’s Council of Economic Advis ers, members of congressional bankMID-CONTINENT BANKER for January, 1 9 8 2 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis We give you big-city clout... close to home When a banker needs a bank, it helps to find one that has the leverage of a major full-service bank like you’d expect to find in Chicago or Mew York. Springfield Marine Bank can give you that kind of service . . . close to home. We are a large bank— in fact, the largest Illinois bank in deposits and capital outside of Cook County. And we’re the main depository for many of our correspondent banks. So we can offer you the products you’re looking for, such as cash-letter services and overline credit. Yet, we make it easy to bank at Marine. Our Central Illinois location allows easy access to all our services and all our people. You can call any of our top management people directly for consultation, if you wish. You can get what you need at Marine. Cash-letter services, overline credit and many other correspondent bank ser vices. With all the convenience you need, too. Call Don McMeely (217) 525-9717 or Mark Janiak (217) 525-9716 for more details. SPRINGFIELD Marine Bank East Old State Capitol Plaza S pringfield, Illin o is 62701 (217) 525-9600 Member FDIC 73 ing committees and senior regulatory officials to address the bankers.” The IBA looks on the congress as the first step of a process to bring all Illinois bankers together to discuss issues important to Illinois and its people. “There are many more positions we have in common than in divi sion,” Mr. Fitch concludes. Illinois' Multi-Bank HC Law Ruled Constitutional Illinois’ new limited, regional multi bank HC and third-limited-servicefacility law has been ruled constitu tional. The law became effective Janu ary 1. A lawsuit challenging the state con stitutionality of the law was filed last year by McHenry State, First Nation al, Lacon, State Bank, Arthur, and Marquette National, Chicago. In dismissing the suit, the judge ruled that multi-bank HCs are not branch banking, which is prohibited in Illinois. Additionally, the judge ruled that the new law received the threefifths vote plurality necessary for pas sage by the general assembly. The judge also ruled that passage of the law was not an unconstitutional delegation of authority by the assembly as sug gested by the plaintiffs. Brent A. Baum has been promoted to assistant vice president/manager, Illi nois Center Facility, National Boule vard Bank, Chicago. Harris Bank, Chicago, has elected Robert A. White and Mary D. Fieldman vice presidents. Mr. Whiteheads the Los Angeles office and Mrs. Fieldman is in the personal trust develop ment division. In other action, Harris Bankcorp. has announced its intent to acquire Argo State, Summit, from CPC International, a food-processing firm, at an estimated cost of $3.3 mil lion. BflNKMflTIC® 24-Hour Automated Teller Machine Network! Kansas’ Fastest Growing! 74 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis New IBA Appointm ent CHICAGO — The Illinois Bank ers Association has named John D. Seymour legislative affairs director. Mr. Seymour, acting director, Illi nois department of financial institu tions, will take his new post the mid dle of this month. Robert C. Shrimple remains ac tive as IBA legislative consultant. Mr. Seymour will be responsible for the administration of the IBA’s Springfield legislative operation, in- CEO and president/chief operating officer, respectively, at Belleville National. Mr. Tiemann moved up from president; Mr. Bielke formerly was with Mercantile Trust, St. Louis Indiana Larry J. Hannah has been elected president, American Fletcher Corp., Indianapolis, and Joseph D. Barnette Jr. has been named president, Amer ican Fletcher National. They succeed Harry L. Bindner, president of both firms, who retired last month. Walter W. Ogilvie Jr., former senior execu tive vice president of both the bank and HC, has been named vice chair man of both firms. Mr. Hannah had been executive vice president of the bank. Mr. Barnette formerly was pres ident, Lake View Trust & Savings, Chicago. Thomas Mensch has been promoted to vice president/corporate services divi sion at Peoples Trust, Fort Wayne. He joined the bank in 1979. cluding management of the legisla tive office and mobilization of bank ers into a more effective political organization. He will be an active lobbyist and secretary of the IBA’s state legislative committee. He also will provide professional input into formulation of state-legislative poli cies and positions. He will report directly to the IBA’s executive vice president, William J. Hocter. Before joining the financial in stitutions department, Mr. Seymour was legislative consultant for the Illi nois Senate com mittees on Local Government and Finance and Cred it regulations. He also served as staff director, Illinois Electronic Funds Transfer Systems Study Commis sion. Randolph F. Williams has been pro moted to vice president/marketing director at Lincoln National, Fort Wayne. He joined the bank last Sep tember. Kansas Fourth National, Wichita, has pro moted three division heads to execu tive vice presidents. They are Leland F. Cox, operations/finance; Gary L. Gamm, investments; and Robert M. First National of the Quad Cities, Rock Island, has appointed Frank P. Clarke president/chief operating offic er. He formerly was senior vice presi dent. The bank changed its name from First National, Rock Island, last Octo ber. Louis E . Tiemann and Dennis E. Bielke have been elected chairman/ CN B COMMERCIAL NATIONAL BANK Max 6TH & MINNESOTA AVENUE KANSAS CITY, KANSAS 66101 Member F.D.I.C. 913 371-0035 CO X GAMM Mike O’Leary Dickerson MID-CONTINENT BANKER for January, 1 9 8 2 Smith Jr., loans. They were formerly senior vice presidents. Mr. Cox joined the bank in 1966 and Messrs. Gamm and Smith have been with the bank since 1969. Kurt Watson and Harry R. Pape were elected vice presidents in the marketing and BankCard divi sions, respectively, and Kim R. Penner was named manager/consumer services in the marketing department. Mr. Watson formerly was with Law rence National; Mr. Pape comes from NCR-Wichita; and Mr. Penner joined the bank last April. First National, Louisville, has pro moted Leslie H. London and Henry D. Ormsby from vice presidents to senior vice presidents and Thomas A. Ford from banking officer to senior banking officer. Kenneth R. Herp Jr. was promoted from associate corre spondent services officer to corre spondent services officer. Steven E . Kocen has joined First Security National, Lexington, as a vice president in the marketing depart ment. He formerly was with a bank in Virginia. Missouri St. Louis County Bank, Clayton, has elected Robert C. Wolford vice chair man and Larry D. Abeln, Linn H. Bealke and Thomas M. Noonan execu tive vice presidents. They joined the bank in 1974, 1970, 1980 and 1973, respectively. In other action, the bank has promoted Michael C. Erb to vice president/trust officer. He joined the bank in 1980. Louisiana Fidelity National, Baton Rouge, has promoted Erik C. Jensen to senior vice president/commercial loan head and Karen A. Penny to assistant vice president/loan review head. They both joined the bank in 1978. SMITH TEMPEL William C. Tem pel has been ap pointed senior vice president/trust di vision manager at Commercial Nation al, Kansas City. He formerly was a senior vice president at Commerce Bank, Kansas City, Mo. Charles Fisher has been elected assis tant vice president in the full-service banking department at First National, Lawrence. Kentucky An international banking facility has been opened in the headquarters of First National, Louisville, to permit the bank to conduct its Eurocurrency business out of its home office as well as its Cayman Islands Branch. A recent ruling by the Fed made domestic in ternational-banking facilities possible. Merger Plans Announced U n ited K en tu ck y , I n c ., and Liberty National Bancorp., In c., Louisville, have begun negotiations toward the possible combination of the two HCs and their subsidiaries, United Kentucky Bank and Liberty National Bank. It’s contemplated that United Kentucky stockholders would exchange their shares for a yet-to-be-d eterm ined num ber of shares of Liberty National Bancorp common stock. Since negotiations are at a pre liminary stage, no com binations have been agreed on and no agree ment on any terms had been reached at press time. First National of Jefferson Parish, Gretna, has elected J. Stratton Orr and Grace Lawson vice presidents and Ronald A. Yancis assistant vice presi dent. Actions are being taken to merge Con tinental Bank, Harvey, into First National of Jefferson Parish, Gretna, and to form First Continental Bancshares, a one-bank HC, with Benton M. Wakefield Jr. serving as HC chair man and Elton A. Arceneaux Jr. as president. It’s anticipated that present directors of both banks will be retained as directors of First National of Jeffer son Parish. Dennis C. James has been elected vice president at Central Bank, Monroe. Mr. James also is the bank’s personnel director. Mississippi John B. Neville has been promoted to senior vice president at Deposit Guaranty National, Jackson. He heads the real estate department. Also pro moted were John R. Jones and Alan H. Walters, both to vice presidents. Mr. Jones is a branch manager and Mr. Walters heads the corporate finance group. MID-CONTINENT BANKER for January, 1 9 8 2 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis ABELN NOONAN The Fed has approved the merger of County National Bancorp., Clayton, and T G Bancshares, St. Louis, to cre ate County Tower Corp., which owns and operates nine St. Louis-area banks at 17 locations with total assets of almost $1 billion. The new HC is said to be the state’s seventh largest bank ing organization and the fourth largest in the St. Louis area. United Missouri, Kansas City, has ac quired United Missouri Mortgage Co. from United Missouri Bancshares. In conjunction with the change, Marlin L. Koelling has been named presi dent. He formerly supervised the real estate loan division of the bank. David A. Kunze has been elected president/CEO at Bank of Crane. He formerly was executive vice president and succeeds Thomas Kinsey, who has moved to Bank of Kennett. NEVILLE M ercantile T ru st, St. Louis, has prom oted Lona W attenberg and Joseph F. Licata to assistant vice presi dents, named Paul H. Garrison a trust officer and Elke E. Moses a personal 75 elected chairman of the Metropolitan St. Louis Group of the National Asso ciation of Bank Women. Also elected w ere Lorraine H. G reene, F irst National, St. Louis — vice chairman; Gloria Brostoski, Cass Bank, St. Louis — treasurer; and Marcella C. Hoeflinger, Citizens Bank, Pacific — secre tary. SALIGMAN KUHLMANN banking officer. Mercantile Bancorp, has received Fed approval to become an issuer of MasterCard travelers checks. Mercantile is said to be the first HC in Missouri to receive such approval from the Fed. The checks are available at Mercantile Trust in de nominations of $20, $50, $f00 and $500 and are sold in packages in multi ples of $50. The bank has elected Fred L. Kuhlmann and Harvey Saligman to its board. Mr. Kuhlmann is vice chairman/executive vice president, An heuser-Busch Companies, and Mr. Saligman is president/chief operating officer, Interco. Centerre Bank, St. Louis (formerly First National) has elected William F. Sommer a senior vice president. He is the bank’s controller and joined the institution in f968. Wayne D. Muskopf has been elected a vice president of Centerre Bancorp, (formerly First Union Bancorp.) He formerly was vice president/personnel manager at First of St. Louis, which he joined in f 968. Country Club Bank, Kansas City, has elected Eugene T. Cernich of E. T. Cernich Co. to its board. SOMMER Claudyne V. Cooper has been pro moted to senior vice president/manager, accounting and control, at United Missouri Bank, Kansas City. She has been with the bank for 39 years. Commerce Bank, Kansas City, has elected Eugene L. Mahaffey and Bus sell L. Koos vice presidents and Ste phen J. Freidell assistant vice presi dent. Mr. Mahaffey is retail lending manager, Mr. Koos is research/development manager and Mr. Freidell is money-market manager. Juanita R. Wilier, vice president, Big Bend Bank, Webster Groves, has been 76 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Liberty National, Oklahoma City, has named three new senior vice presi dents: Gary Burton, Liberty credit card center manager; Edward E. Korell, manager/installment loan de partment, and Raymond C. Reier, manager/loan administration depart ment. Promoted to vice presidents were: Latricia Harper, operations; J. Michael McGee, commercial banking; First National, Kansas City, has pro moted Craig L. Bouise Sr. to vice president/comptroller, David C. Rigg to vice president, Michele A. Manne and Mark T. Massey Jr. to assistant vice presidents and Nancy L. Booth, Dorothy Jetton, Darrell Smock, Mark A. Stutte and Charles W. Waide to assistant cashiers. Mr. Bouise joined the bank in f975 and Mr. Rigg has been with First National since 1973. KORELL New Mexico Reed H. Chittim, president/CEO, First National of Lea County, Hobbs, has been elected to the board of Secur ity National, Lubbock, Tex. The latter recently was bought by a group of Lub bock and other west Texas investors headed by Sam Spikes. Mr. Spikes, a director of First National of Lea Coun ty, also is chairman of the newly ac quired Texas bank. Mr. Chittim also is chairman of First City National, Carls bad, and president/CEO, First City Financial Corp., a new multi-bank HC with corporate offices in Hobbs. Ralph N. Lester, auditor, New Mex ico Banquest Corp., Santa Fe, has been recognized as a chartered bank auditor by the Bank Administration In stitute. He was one of 162 internal au ditors to qualify for the CBA certificate in 1981. COOPER Oklahoma Ruidoso State has signed a contract with Electronic Data Systems Corp. (EDS), Dallas. Under terms of the agreement, EDS will provide the bank total turnkey assistance for imple menting service on the bank’s compu ter, IBM’s System/34. Additionally, EDS will give software-application support to the bank on a continuing basis, providing regulatory and system enhancements. BURTON REIER Jake Riley, corporate trust, and Millie Weaver, personal banking center. In other action, Liberty National elected seven new assistant vice presidents: LaWanda Chastain, international; Vickie Dilbeck and Luke Wigley, credit card center; James W. McIn tyre, investm ent services; B. J. Schmidt, legal; Stuart B. Strasner Jr., investment services, and Robert Tack ett, loan administration. Bank Spokesman Honored Principals at the recent fourth annual offi cer-call breakfast at Liberty Nat'l, Oklaho ma City, included (from I.) Paul Strasbaugh, e.v.p., Oklahoma City Chamber of Commerce; J. W. McLean, ch., Liberty N at'l, and Ed McMahon, TV personality and the bank's TV/radio spokesman. Mr. McMahon spoke on "Salesmanship— 1982 Style" at the breakfast. He was given Oklahoma City's "top hand" award and "hot brand" statuette by Mr. Strasbaugh. MID-CONTINENT BANKER for January, 1 9 8 2 lishing firm. Before that, Mr. Gibson was first vice president/director of fixed-income research, Smith Barney, Harris Upham & Co. In the banking field, he once was vice president/ monetary affairs director, Chase Man hattan, New York City. Rex Horning has been named vice president/consumer loans, Central National, Enid, which he joined last June. He formerly was credit adminis trator, Agrico Chemical Co. Ronald F. Shepard has been made dis trict service manager for Diebold, Inc., Canton, O. He directs the firm’s service activities in the Oklahoma City area. Martin G. Istock, who joined Oklaho ma City’s Fidelity Bank in October, has been elected vice president/manager, investment trading, investment division. Two assistant vice presidents were named: Jay Hallman, director/ credit card department, retail banking division, and Eleanor M. Deterich, commercial loan officer/commercial lending division. Robert E . List has been elected presi dent, Boulder Bank, Tulsa. He was executive vice president. William R. Shaw, who was chairman/president, continues as chairman. Tennessee R obert E . M atthews and F. Ray White have been promoted to vice presidents at Nashville’s Third Nation al, and Donald Hudgins was advanced to assistant vice president. Mr. Mat thews is manager/credit card center; Mr. White is in installment lending, and Mr. Hudgins is senior computer service representative. The Fed has approved the following bank-HC form ations: H ardem an County Investm ent C o ., Bolivar, through acquisition of Hardeman County Bank, Bolivar; Community Financial Services, Bolivar, through acquisition of Bank of Bolivar, and Germantown Bancshares, through ac quisition of Bank of Germantown. Texas Ted Davis has been promoted from executive vice president to president, First National, Amarillo. He succeeds Gene Edwards, who retains the titles of chairman/CEO. Mr. Davis joined the bank as a vice president in 1969 after having spent seven years with First National, Dallas. Mr. Edwards joined First National in 1949, became president in 1964, CEO in 1969 and chairman in 1975. He headed the Texas Bankers Association in 1974-75. In other action, the bank promoted Don Powell to succeed Mr. Davis as executive vice president in charge of EDWARDS the lending division. He was senior vice president and also is a bank direc tor. Senior Vice President Pete Dallas has been named head of commercial loans/lending division; Sharon Brown, head of customer services, was elected senior vice president; Senior Vice President Dick Harris now is responsi ble for industrial development and corporate services/lending division; Senior Vice President Jack Little was named head of the trust department/ trust division, with Executive Vice President Kenneth Sloan remaining head of the trust division; Senior Vice President Joe Horn heads the newly created investment division; Vice President Don Handley was named head of business development/marketing division; Senior Vice President Bill Sewell continues as head of the marketing division; Assistant Vice President Margo Fields has been named head of the newly created marketing services departm ent/ marketing division, and Hershel Kime and George Reeves were named vice presidents. Mr. Reeves is in charge of electronic banking. Robert H. Fillingim Jr. has been ap pointed manager of the new San Anto nio regional office of LeFebure, Cedar Rapids, la. Mr. Fillingim supervises sales for a territory that includes much of west Texas. Previously, he was man ager of LeFebure’s Houston office. William E. Gibson has joined Repub lic of Texas Corp. (RPT), Dallas, as senior vice president/chief economist. He most recently was senior vice president/economics and financial policy, McGraw-Hill, a New York City pub- MID-CONTINENT BANKER for January, 1 9 8 2 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis DAVIS Frost Bank, San Antonio, has named these vice presidents: Timothy P. Booker, note processing; Mike Greg ory, systems support; Bryan A. Ken drick, auditing, and C. S. Plummer Jr., automated customer services. Irma Lawrence was named assistant vice president/credit collections. Giveaw ay Van Promotes ATM s This van was given aw ay by First United Bancorp., Fort Worth, and 12 Moneycard member banks as part of a Moneycard autom atic banking promotion. Contest was based on customer registration at par ticipating banks. Goal of promotion was to increase public interest in ATM demonstra tions and to achieve subsequent customer acceptance of Moneycard. Contest partic ipation was said to be excellent and subse quent acceptance of Moneycard through an initial mailing exceeded expectations in terms of completed applications. Photo shows Gary Crenshaw (r.), v.p./ATM m an ager, First United Services, handing over van keys to winner. • In d e x to A d v e rtise rs Acceleration Life Insurance ................................. American Bank Directory ..................................... American Express Co. (Travelers Cheques) ........ Arrow Business Services, Inc................................ Assemblies for Bank D irectors............................. Associates Commercial Corp................................. 41 38 21 32 25 29 Bacon, AIA Architect & Assoc., Richard L.......... Baker & Co., Jam es.............................................. Bank-Aide, Inc........................................................ Bank Administration Institute ............................. Bank Board Letter ........................................ 55, Bank Building Corp................................................ Boatmen's National Bank, St. Louis ................. Bunce Corp............................................................. 10 65 78 27 71 49 79 39 Cado Systems Corp................................................. Cawthorn Building Systems, Inc........................... Centerre Bank, St. Louis ..................................... Commerce Bank, Kansas City ............................. Commerce National Bank, Kansas City, Kan. .. Computer Management Systems, Inc................... Credit Seminars .................................................... 35 31 80 19 74 78 23 Daktronics, Inc........................................................ 37 Ecom Systems, Inc................................................. 69 Financial Placements .......................................... 72 First Alabama Bank, Montgomery....................... 63 First National Bank, Belleville, III........................ 61 First National Bank, Kansas City ....................... 11 First National Bank of Commerce, New Orleans 13 HBE Bank Facilities Corp...................................... 57 Hagan & Associates, Tom ................................... 78 Heller & Co., Walter E........................................... 67 FILLINGIM GIBSON (Continued on page 78) 77 Industrial Life Insurance Co.................................. 10 Liberty National Bank & Trust Co., Oklahoma City 2 You'll Get EXTRA Profits Travelers Express.................................................. 50 From The 4 Management Cycles. Volunteer State Life Insurance Co........................ 9 Whitney National Bank, New Orleans ............... 7 Memphis Bank & Trust Co..................................... 3 Mercantile Bancorp., St. Louis ........................... 5 Missouri Encom, Inc.............................................. 78 Springfield Marine B a n k ....................................... 73 Stern Brothers ...................................................... 45 M a rc h 14-18: In d e p e n d e n t B an kers A s s o c ia tio n o f A m e r ic a C o n v e n tio n , H o n o lu lu , S h eraton W a ik ik i. M a rc h 21-24: A B A N a tio n a l In sta llm en t C r e d it C o n fe r en c e , D allas, L o e w ’s A n a to le. M a r c h 2 1 -2 4 : A B A T r u s t O p e r a tio n s / A u to m a tio n W o rk s h o p , A tlan ta, H y a tt R e g e n c y . M a rc h 21-25: Bank A d m in is tra tio n In stitu te Bank A u d ito rs C o n fe re n c e , H o lly w o o d , F la ., D ip lo m a t. M a r c h 22-26: Bank M a rk e tin g A sso cia tion Essentials o f B an k M a r k e t in g S ch o o l, A th en s. U n iv e r s it y o f G eo rg ia / M a rc h 28-31: A B A S ou th ern R e g io n a l Bank C a rd C o n fe r e n c e , A tlan ta, O m n i In tern a tion a l. A p r il 2-6: L ou isian a B ankers A sso cia tion A n n u a l C o n ven tio n , N e w O rle an s, N e w O rle a n s H ilto n . Completion— Evaluation m \ M Where Are How Do We Get There? A p r il 3-6: A ssocia tion o f R e s e r v e C it y B ankers A n n u al M e e tin g , P h oe n ix , A riz o n a B iltm o re . Where Are We? A p r il 13-16: Bank A d m in is tra tio n In s titu te A ccou ntin g/ F in a n c e C o n fe re n c e , O rla n d o , F la ., H y a tt R e g e n c y O rlan do. Convention Calendar A p r il 18-20: C o n fe r e n c e o f S tate Bank S u p ervisors We Going? A n n u a l C o n v e n tio n , N e w O rle an s, F a ir m o n t H o te l. A p r i l 18-23: A B A N a t io n a l C o m m e r c ia l L e n d in g Jan. 24-27: Bank A d m in is tra tio n In stitu te Bank P r o WITH OUR HELP AND PROVEN SYSTEMS cBANK^MDEinc > ' rqfessional B ank C onsultants 7 3 4 West Port Plaza Suite 2 5 5 St. Louis, Missouri 63141 3 1 4 -4 3 4 -8 8 9 9 d u c tiv ity C o n fe re n c e (P A T H ), A tlan ta. Jan. 25-28: A B A In su ra n ce and P r o te c tio n C o n fe re n c e o f F in a n cial In stitu tio n s, N e w O rle an s, H y a tt R e g e n cy. G ra d u a te S ch o o l, O klah om a. N o rm a n , O k la ., U n iv e r s it y o f M a y 2-6: A lab am a B an kers A sso cia tion A n n u a l C o n v e n tio n , L a k e B u en a V ista, F la ., C o n te m p o ra ry H o te l. D is n e y W o r ld , L e n d in g W o rk s h o p , M a y 2-13: A B A N a tio n a l C o m m e rc ia l L e n d in g School, N o rm a n , O k la ., U n iv e r s ity o f O klah om a. Jan. 3 1 -F eb . 3: A B A C o n fe re n c e fo r B ranch A d m in is M a y 3-6: A n n u al P re m iu m In c e n tiv e S h ow , N e w Y o rk C ity , C o liseu m . Jan. 27-29: A B A C o n s tru c tio n D e n v e r , F a irm o n t H o te l. trators, A tlan ta, O m n i In tern a tion a l. Los M a y 9-12: O k la h om a B an kers A sso cia tion A n n u a l C o n v e n tio n , O k la h om a C ity , S h e ra to n -C e n tu ry C e n te r . New M a y 9-12: T e n n e s s e e B ankers A sso cia tion A n n u a l C o n v e n tio n , A tlan ta, P e a c h tre e P la za H o te l. F e b . 7-19: A B A N a tio n a l In s ta llm e n t C r e d it School, N o rm a n , O k la ., U n iv e r s ity o f O klah om a. F e b . 25: Bank A d m in is tra tio n In s titu te In t e r v ie w in g Skills W o rk s h o p , N a sh ville. M a y 11-14: A B A N o rth e rn R e g io n a l Bank C a rd C o n fe r e n c e , C h ica go , H y a tt R e g e n c y C h ica go . M a y 12-14: A sso cia tion o f B ank H o ld in g C o m p a n ies A n n u a l M e e tin g , San A n to n io , T e x ., H y a tt R e g e n c y . M a y 13-15: M iss ou ri B ankers A sso cia tion A n n u a l C o n v e n tio n , St. L o u is , S to u ffe r’s R iv e r fr o n t In n . M a y 13-15: Texas B ankers A sso cia tion A n n u a l C o n v e n tion , D allas, L o e w ’s A n a to le H o te l. F e b . 2 8 -M a rc h 3: A B A C o m m u n ity Banks E x e c u tiv e C o n fe re n c e , D allas, F a ir m o n t H o te l. M a y 15-18: Arkansas Bankers A sso cia tion A n n u a l C o n v e n tio n , H o t S prin gs, A rlin g to n H o te l. M a rc h 2-5: Bank A d m in istra tio n In s titu te C h e c k P r o ces sin g C o n fe re n c e , N e w O rle an s, M a rrio tt. M a y 16-18: Bank A d m in is tra tio n In s titu te B ank Tax C o n fe re n c e , N e w O rlean s. M a rc h 7-10: A B A N a tio n a l C r e d it C o n fe re n c e , A n g e le s , C e n tu ry Plaza. M a y 16-19: A B A N a tio n a l C o n fe r e n c e on R e a l E sta te F in a n c e, W a s h in g to n , D . C ., C a p ita l H ilto n . M a y 16-19: Bank M a r k e tin g A s s o c ia tio n C o rp o r a te F e b . 7 -10 : A B A B a n k T e le c o m m u n ic a t io n s , A n g e le s , C e n tu ry Plaza. F e b . 7-10: A B A N a tio n a l T r u s t C o n fe r e n c e , O rlean s, H y a tt R e g e n c y . F e b . 10-12: A B A Bank In v e s tm e n ts C o n fe re n c e , San F rancisco, St. Fran cis H o te l. F e b . 23-26: A B A N a tio n a l C o m p lia n c e C o n fe re n c e , P h oe n ix , H y a tt R e g e n c y . L os M a rc h 8-11: R o b e r t M o rr is A ssociates F in a n c ial S tate m e n t A nalysis W o rk s h o p , N e w O rlean s, M a rr io tt H o te l. M a r c h 10-12: A B A C o rp o ra te / C o m m e rc ia l M a rk e tin g C o n fe re n c e , San F ra n cisco, H y a tt R e g e n c y . M a r c h 10-12: A B A Bank P la n n in g W o rk s h o p , D e n v e r , D e n v e r M a rrio tt C it y C e n te r . M a rc h 14-17: Bank A d m in is tra tio n In s titu te C o n fe r e n c e on Bank S ecu rity, Kansas C ity , C r o w n C e n te r H o te l. M a rk e tin g C o n fe re n c e , T a rp o n S prin gs, F la ., In n isb roo k R esort. M a y 17-18: A B A In s u ra n c e In d u s tr y C o n fe r e n c e , W a s h in g to n , D . C ., W a s h in g to n M a rrio tt. M a y 19-21: Kansas B an kers A sso cia tion A n n u a l C o n v e n tio n , W ic h ita , W ic h ita R o y a le H o te l. M a y 20-23: M ississip p i B ankers A sso cia tion A n n u al C o n v e n tio n , B iloxi, B ro a d w a te r Beach/B iloxi H ilto n H o te ls. M a y 23-26: A B A N a tio n a l M a rk e tin g C o n fe re n c e , San F rancisco, H y a tt R e g e n c y H o te l. ONE YEAR FREE TRIAL M a y 23-28: A B A N a tio n a l C o m m e rc ia l L e n d in g G ra d u ate School, N o rm a n , O k la ., U n iv e r s ity o f O klah om a. We have spent 4 years developing from scratch a complete financial software package to run on IBM S/34 for banks and savings and loans. We believe this is the finest package available anywhere. We believe this so strongly, we will install our package, and after one year you pay us $25,000 or return it and pay nothing for the package. Our package will be ready to run on IBM S/38 by October of 1982. We have several stand-alone packages also available now, such as repurchase agreements, check reconciliation and payroll software. For further information contact: Bill Joyce __Computer Management Systems, In c .__ P .0 . Box 1 7 3 1 , Liberal, Kansas 6 7 9 0 1 Phone: 3 1 6 - 6 2 4 - 0 1 5 8 Offer subject to cancellation without notice. 78 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis MID-CONTINENT BANKER for January, 1 9 8 2 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Boatmen’s Ted Smothers. Operations Assistance Overline Assistance. Loan Participations. Investments. Boatmen’s Vice President Ted Smothers working with Bob Menz, Chairman and President o f The First National Bank o f Highland. Whatever your correspondent needs, Boatm en’s has knowl edgeable people to assist you. Call Ted Smothers. He can help. Correspondent Banking Division THE BOATMEN'S NATIONAL BANK OF ST. LOUIS 314- 425-3600 Member FDIC A m e ric a ’s n e w e s t n a m e in b a n k in g is rig h t in th e c e n te r o f th in g s . First National Bank in St. Louis is now called Centerre Bank. So is Columbia Union National Bank in Kansas City. Don’t worry. It’s only a change of name. Not a change of service. All the correspondent banking services you’ve come to count on from these banks are still available. And the same experienced people are still on hand to provide them to you. Centerre Bank. It’s a new name. But we’re not changing a thing about the way we handle your correspondent banking needs. CENTERRE Member FDIC https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis MidAmericas Bankers. Formerly First National Bank in St. Louis Formerly Columbia Union National Bank and Trust Company
@FedFRASER