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MID-CONTINENT BANKER (IS S N 0 0 2 6 -2 9 6 X ) The Financial Magazine o f the M ississippi Valley & Southw est »NBOR -K k^ V < E«RSTMflS EbOB mm / Bank Lobby Becomes Fairyland — Page 26 Christm as Supplies for Banks — Page 32 Christmas Planning Issue https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis JULY, 1981 "It’s still hard to believe such a big bank can move so fast.” “ Not long ago a cu sto m e r ca m e to us with a loan re q u e st that need ed fast actio n . It w a s c o n sid e ra b ly m ore d o lla rs than w e co uld hand le o u rse lv e s, so w e turn ed to Lib erty. E v e n though th e re w e re a num ber of e xtra o rd in a ry c irc u m s ta n c e s in vo lved , w ith the help of th e ir C o rre sp o n d e n t D epartm ent, w e had the deal clo se d in le ss than a w e e k . It’s still hard to b e lie v e su ch a big bank can m ove so fast. T h a t’s the kind of re s p o n s iv e n e s s that’s kept us a L ib e rty cu sto m e r for n e a rly 4 0 y e a r s .” p ro b lem s and ta ke full a d va n ta g e of th e ir o p p o rtu n ities. B u t tru e re s p o n s iv e n e s s is m ore than d a ily reactio n to im m ediate n e e d s. It also in v o lv e s the an ticip atio n of th o se n e e d s. S o L ib e rty b a n ke rs a re co n tin u a lly an a lyzin g and a p p raisin g the econo m y, the m arket for n ew s e rv ic e s , new d ire c tio n s w ithin our in d u stry and a co ntinuing flo w of te c h n ic a l inform ation —to help you m ake the m ost of y o u r own new o p p o rtu n ities. C all us at 2 3 1 -6 1 6 4 . No m atter w hat siz e cu sto m e r you a re , no m atter how larg e or sm all yo u r s p e c ific need m ight be, when you talk—we respond. R o b e rt W atts P re sid e n t and C h ie f E x e c u tiv e O ffic e r M adill B a n k and Tru st C o m p an y O n e w ay L ib e rty d e m o n stra te s responsiveness is by m eeting the s p e c ific n e e d s of our resp o n d en t b an ks on a d a ily b asis, helping them s o lv e th e ir OUR CORRESPONDENTS CALL IT SUPERIOR SERVICE. W E CALL IT BUSINESS AS USUAL BECAUSE... W E CARE ABO UT YOU. - 777TTT/ ¡■ » ¡it. rf h r LIBERTY T H E B A N K O F M ID -A M ER IC A The 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 MHT LANDS IN NEW TERRITORY. Introducing a new package of protection for correspondents from M anufacturers Hanover. Leave it to Am erica’s prem ier “banker’s bank” to pull the cord on casualty insurance costs. W b analyzed the needs of banks and the plans avail able. Out of our study has come a program uniquely able to protect banks— their officers and employees— against modern-day risks. From stockholder lawsuits to extortion, from employee errors to employee dishonesty. One primary benefit of the MHT program is flex ibility. You can buy the total package of coverages, choose any combination of two or more, or even opt for only one. The policies available are: Bankers Blanket Bond, Directors and Officers Liability, Trust Department Errors and Omissions, Em ployee Benefit Plans Liability, Extortion and Kidnap/Ransom, https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis and Commercial Umbrella Liability. No more worries about dangerous coverage gaps or costly overlaps. Another plus of going through MHT is that your local broker can work w ith our managing broker when renewing or adding coverages. And best of all, MHT offers you the economies of group participation. Find out all about the new MHT Casualty Insurance Program. W rite or call Charles R. Burrows, Vice President. His number is (212) 350-3359. Vte’ll land you right on target: comprehensive casualty coverage at a volume discount. MANUFACTURERS HANOVER America's premier correspondent bank Member National Division, 3 5 0 Park Avenue. New York, NY. 10 0 2 2 fdic Harold Colbert Dies; Was Long-Time Member Of MCB Editorial Staff Volume 77, No. 8 July, 1981 FEATURES ST. LOUIS — Harold R. Colbert, former president/CEO, Commerce Publishing C o., publisher of M i d C o n t in e n t B a n k e r , died June 20 fol lowing a lengthy illness. He was 73. 25 BANKS COMPETE AGAINST MONEY-MARKET FUNDS Bankers not lying down and playing dead 34 CHRISTMAS IDEAS THAT WORK! Promotions any bank can use 42 HOW TO USE PEOPLE RELATIONS W hen planning a Christm as promotion 46 ETHICS FOR THE LOAN OFFICER How to avoid troublesom e situations 54 S&Ls BEST BANKS IN 'NOW' COMPETITION Survey reveals n ear-$1 ,8 0 0 average balance DEPARTMENTS 6 BANKING WORLD 10 OPERATIONS 14 INSTALLMENT LENDING 8 REGULATORY QUESTIONS 12 SELLING/MARKETING 18 CORPORATE NEWS 16 EFTS 20 THE BANKING SCENE CONVENTION REPORTS 60 INDIANA 62 ILLINOIS STATE NEWS 65 ALABAMA 67 INDIANA 67 LOUISIANA 69 NEW MEXICO 65 ARKANSAS 67 KANSAS 67 MISSISSIPPI 69 OKLAHOMA 66 ILLINOIS 67 KENTUCKY 68 MISSOURI 69 TENNESSEE 69 TEXAS EDITORS Ralph B. Cox ......... P u blish e r Rosemary McKelvey .. E ditor Lawrence W. Colbert A ssista n t to the P u blish e r Pamela Walsch A ssista n t E d ito r Jim Fabian . . . . S enior E d ito r Eleanor Wainwright E d ito ria l A ssistant MID-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 $2 7 ; two years $20; one year $12. Single copies, $2 each. Foreign subscriptions, 50% additional. Milwaukee, W is., 161 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 ex cept semimonthly in May 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 Mr. Colbert joined Commerce Pub lishing Co. in 1929 as an assistant edi tor of M i d -C o n t in e n t B a n k e r . He re mained with the firm for more than 42 years, retiring at the end of 1972. In the interval, he occupied many of the editing and publishing posts of the firm and held corporate responsibilities. He served as associate editor of M i d C o n t in e n t B a n k e r and as assistant editor, associate editor and editor of the firm’s two national monthly insur ance publications, L i f e I n s u r a n c e S e l l in g and T h e L o c a l A g e n t (now A m er ic a n A g e n t & B r o k e r ). He later served as assistant publisher, associate publisher and publisher of all the firm’s magazines. At the corporate level, he served as vice president, was named executive vice president in 1962, president in 1967 and CEO in 1968. He also was a director and president of Director Publications, In c., a subsidiary of Commerce Publishing that publishes The B ank B o a r d Letter. He was a member of the board and vice presi dent of Bankers Publishing Co., Mil waukee, publisher of M i d - W e s t e r n B an k er. Long active in the M ethodist church, he served as chairman of the board of trustees of Grace United Methodist Church. At the time of his death, he was vice president of the Missouri United Methodist Founda tion, Inc. He is survived by his wife, Lydia McDaniel Colbert; two sons, Law rence W. Colbert, assistant to the pub lisher of M id - C o n t in e n t B a n k e r and a vice president of Commerce Pub lishing Co., and William C. Colbert, Memphis; and six grandchildren. MID-CONTINENT BANKER for July, 1981 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. Correspondent Banking Division M ercantile Trust Com pany N.A. St. Louis, MO (314) 425-2404 MID-CONTINENT BANKER for July, 1981 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis MERCnnTIIE B R fK BANKING WORLD Richard L. Thomas, president, First N ational Bank and F irst Chicago C orp., Chicago, has been elected chairman, Association of Bank Holding Companies. He succeeds Paul Mason, president, F irst United Bancorp., F o rt W orth. Donald L. R ogers, Washington, D. C ., was re-elected man, AmSouth Bancorp., Birming ham, Ala., was reelected treasurer. Enis Alldredge Jr. and Thomas M. Hoenig have been promoted to vice presidents at the Kansas City Fed and Robert W. Allen and John C. Vandermade were promoted to operations officers. Mr. Alldredge has been trans ferred to the Denver Branch and Mr. Vandermade has moved to the Omaha Branch. THOMAS president of the association; H. Fur long Baldwin, president, Mercantile Bankshares, Baltimore, was advanced to chairman-elect; Will F. Nicholson J r ., p resid ent, Colorado National Bankshares, Denver, was elected vice chairman; and John W. Woods, chair- S IN G L E IN T E R E S T IN S U R A N C E For Installment Loans Dorothy Cosgrove, administrative assistant/data processing division, Commercial National, Kansas City, Kan., has been installed as president, Kansas City (Kan./Mo.) AIB Chapter. She succeeds Judy Benjamin, vice president/manager, cred it depart ment, First National, Kansas City, Mo. Other new officers from the latter city are: first vice president, Patrick Boyle, vice president/bank card divi sion, United Missouri; second vice president, Dev Strischek, vice presi dent/manager, commercial credit de partment, Commerce Bank; secretary, M arilyn Andela, ad m in istrative secretary, Red Bridge M ercantile; treasurer, William M. Smith, cashier, Livestock National; directors, Jeannel Hall and Robert Campbell, KC Fed, and Dale Rapp, vice president, First BLANKET SINGLE INTEREST INDIVIDUAL SINGLE INTEREST PROGRAMS • Automated • Manual PROTECT YOUR LOANS AGAINST THOSE PHYSICAL DAMAGE LOSSES. CONTACT US ABOUT A PROGRAM FOR YOUR BANK. call or write: unyw G . D. V A N W A G EN EN CO . 524 Plymouth Bldg. Minneapolis, MN 55402 (612) 333-2261 6 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis J. Rex Duwe, ch., AIB educational div., A B A , presents Dorothy Cosgrove w ith gavel symbolic of her election as pres., Kansas City AIB Chapter. She is admin, asst./data processing div., Com m ercial Nat'l, Kansas City, Kan. Mr. Duwe, former ABA pres., is on board of Commercial Nat'l and is ch. of several Kansas banks, includ ing Farmers State, Lucas. National, Liberty. New directors from Kansas City, Kan., are Vickie Hurst, MidAmerican Bank, Roeland Park, and Step hen R obertson, auditor, Shawnee State. Mary Lou Baca of the office staff has been promoted from administrative assistant to education/ administrative coordinator. Jean Oebermann, assistant vice presi dent, Gravois Bank, St. Louis, has been elected president, St. Louis AIB chapter. Other new officers include John W. Rowe, senior vice president, First National, St. Louis — first vice president; G. Thomas Andes, execu tive vice president, First National, Belleville, 111. — second vice pres ident; Ruth Doerner, assistant cashier, B oatm en ’s National, St. Louis — associate vice president; and Robert Helfrich, vice president, Landmark Northwest Plaza Bank, St. Ann, Mo. — treasurer. Certain Exceptions Expedited On Interlocking Management WASHINGTON, D. C. — The Fed is amending its rules of delegation of authority to allow its general counsel to expedite certain exceptions to rules against interlocking managements of depository institutions. Such exceptions are provided for under the Depository Institution Man agement Interlocks Act when one of the institutions — usually a small nonmember — is in particular need of management expertise. In such cases, the Fed relies on advice of the primary supervisor of the institution in need of assistance in determining whether an exception should be made to allow management from a member bank or bank HC to lend such assistance. D elegatio n of authority to the general counsel is meant to speed up the granting of exceptions where the Fed is not the primary supervisor. The Fed will consider other requests for exceptions. MID-CONTINENT BANKER for July, 1981 When your com m ercial custom ers need that little extra. We mean business. Let’s say a customer wants to start a new business. Or expand an old one. And you want to make sure that both you and he will be happy with the loan arrangements. \Ne have professional loan officers on our correspondent staff for that very reason. People who know what questions to ask, and how to structure a loan to reduce your risk and make your customer smile. All in a very quick time frame. If you have a tough commercial loan question, talk to us. Well have an answer that’ll mean good business for you. Call and ask for Ed Hughes or Karen Mills. O FIR ST NATIONAL D rarterBank KA N SA S C IT Y 10TH AND BALTIMORE □ BOX 38 □ KANSAS CITY, MO 64183 □ (816) 221-2800 □ MEMBER FDIG MID-CONTINENT BANKER for July, 1981 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 7 Telephone Network System Seen Impractical by ABA F ed Answers Reg Questions 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. The following questions and answers relate to some changes in disclosures brought about by Regulation Z Simplification. On a direct loan to * purchase an auto mobile, is the “total sale price” disclosure required?” Q A No. The definition of • “credit sale” means a sale in which the seller is the creditor. In the case of a direct loan for the purchase of any property, if the credit is not payable to the seller of that property there would be no credit sale, thus no “total sale price” disclosure would be re quired. Q A May the components * of the finance charge be itemized? No. The regulation re• quires the disclosure of finance charges as a singledollar amount, using the term “finance charge,” with a de scription similar to “the dollar amount the credit will cost you.” There is a prohibition against itemizing the elements of the finance charge in the segregated required disclo sures. lf a note is on der * with interest pa} monthly, must the amou those interest payments b< Q 8 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis closed? A No. In a demand • obligation with no alternate maturity date, the creditor has the option of dis closing only the due dates or periods of interest payments for the first year. Must the assumption * clause be included in mobile home credit disclosure? Q A Yes. If the mobile • home is part of a res idential mortgage transaction, a statement whether or not a sub sequent purchaser of the dwell ing may be p erm itted to assume the remaining obliga tion on the original terms must be included in the disclosures. What disclosures are * to be made on the assumption of a mobile home? Q A For transactions qual• ifying for assumption, disclosures must be based on the rem aining obligation . Items which would be required include unpaid balance of the obligation assum ed, total charges imposed by the credi tor in con n ection with the assum ption, the annual percentage rate originally im posed on the obligation, the payment schedule, total of pay ments and all other applicable disclosures. The ABA has decided to terminate its feasibility study for implementing a nationwide shared telephone system for banks. “The more we study the project, the more we recognize that we don’t want to lock the banking industry into a fixed communications network while technology continues to move forward so rapidly in voice and data com munications,” said Lois C. Martin, chairperson of the research and plan ning committee of the ABA’s opera tions and automation division. The study was begun in 1978 and involved creating a shared-voice net work for bank-to-bank communica tions among the more than 13,000 domestic ABA-member banks. Six teen vendors responded to an ABA re quest for information on such a net work. “The majority of vendors couldn’t offer the assurance of continued flex ibility for integrating new voice and data communications technology into the system,” said Miss Martin, who is vice president, First Bank, St. Paul, Minn. “Others offered services that appear to be substantially available to the industry today. “While the concept envisioned the possibility of stabilizing the rapidly escalating telephone cost through a truly industry-oriented telephone net work, our research indicates that the industry might build a network and quickly find it inflexible and not price competitive,” she said. “We also recognize that most large banks now have installed least-cost routing systems for their telephone services and a number of banks have negotiated contracts with common car riers for dedicated telephone network services. In either case, a new network wouldn’t be cost effective for these banks.” M erc to Sell Mortgages Mercantile Trust, St. Louis, plans to sell most of the loan servicing con tracts of its subsidiary, Mercantile Mortgage Co., to Citicorp Personto-Person, St. Louis. M ercantile M ortgage was ac quired by Mercantile Trust in 1963, is headquartered in St. Louis and has 12 offices in five states. Its loan port folio totaled $1.18 billion on March 31, 1981. Although the transaction will not have a material effect on Mercan tile’s continuing operations, it is anticipated the sale will result in a significant gain. MID-CONTINENT BANKER for July, 1981 The Investment Professionals John Palmer Richard Carlson Senior Vice President Assistant Vice President Wesley B. Russell Daniel McIntyre Stephen Parker Bond Investment Representative Bond Investment Officer Bond Investment Officer First N BC ’s Investment Officers have the knowledge and the experience to answer even your most complex investment ques tions. We offer a wide range of investment services including up-tothe-minute information on money market transactions, Certifi cates of Deposit, Repurchase Agreements, Eurodollars, Bankers Acceptances, etc. We trade Government Securities, Agencies, Municipal Bonds and Notes. We also offer automated Bond Portfolio Services. The next time you need assistance on investment matters, call the Investment Professionals at First NBC. First NBC New Orleans 1-800-462-9511 (Louisiana) 1-800-535-9601 (M iss., A la., East Texas, Ark. and Okla.) 1-504-561-1371 (otherareas) M em ber F D IC MID-CONTINENT BANKER for July, 1981 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 9 Operations In-House Automation for Branches DM IN ISTRA TIVE functions of branch banking can be auto mated within the branches, relieving their personnel of manual writing, typ ing and calculation efforts, thanks to a new software product called ADTRAN (adm inistrative tran saction ). This equipment was unveiled by Bunker Ramo C orp.’s Information Systems Division at the ABA’s national operations/automation conference held in New Orleans in May. Also, by automating these functions within a branch, Stephan A Grosky, Bunker Ramo division vice president/ banking and commercial systems, says that branch staffs have instant availa bility of necessary documentation and file data. For most operations, he adds, this is done without need to access the bank’s host computer. As a result, according to Mr. Grosky, another advantage is gained: The host’s data processing load and communications links are unburdened considerably. ADTRAN can computerize loan op erations, record changes, bookkeeping and new accounts and report printing and personal-banking functions in the platform and operation s areas of branches. Also announced in New Orleans were several hardware additions that complement ADTRAN software’s fea- tures. These devices include a highcapacity rigid data-storage disk, a let ter-quality forms printer, a line print er, a plug-in math processor and an advanced memory-expansion feature for Bunker Ramo s standard in-branch program mable control unit (PCU) m inicom puter. ADTRAN software and its associated hardware peripher als operate under control of this mini computer, which, in turn, is interfaced on-line to a bank’s central mainframe computer when required. The new software package is an out growth of Bunker Ramo s System 90™ , which has automated teller op erations in about 5,000 banking offices. ADTRAN can operate either on its own or coexist with BANKTRAN®, System 90 s teller-application soft ware. It combines the operation of cur rent System 90 components, including video terminals, floppy disks and the PCU branch minicomputer with the newly announced hardware devices. The in-branch ADTRAN software and associated hardware also interface on line with a bank’s central mainframe computer, although off-line local op eration and on-line batch transmission also are supported. In addition, Sys tem 90 ties in Diebold automatic teller machines (ATMs) to many banks’ cen tral processors. Designed for the busy executive $50 *standing order AMERICAN Bank Directory 6364 Warren Drive Norcross, Ga. 30093 (404) 448-1011 $80 *single issue *Plus shipping and handling An executive’s time is valuable. Too valuable to waste search ing for a single copy of a large, expensive reference book. The American Bank Directory is the nation’s only complete bank directory small enough to fit comfortably on the corner of a desk. It provides easy access 10 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis to information on any bank or multi-bank holding company in the United States. And it’s low in price so an office can keep several copies on hand. Order your copy of the American Bank Directory today. It’s the desk-sized directory designed for the busy executive. In typical System 90 installations, a direct communications link to the host computer normally is retained for sys tems that support teller terminals or ATMs. With ADTRAN, the link is used for on-line reference to central files not maintained locally, for offhour batch transmission of branch data to central files and for central-system reports to a branch. ADTRAN software is made up of five applications modules. A bank can choose among these modules depend ing on its needs and later add others as requirements grow. Basic functions of these applications modules are: dis play forms, records, document print, calculations and batch print. A D T R A N ’s H a r d w a r e . V id eo display terminals with a 960-character, nine-inch screen, ora 1,920-character, 12-inch screen, both with full alpha numeric keyboard, and a letter-quality forms printer are used for platform op erations, such as loan applications and personal-banking functions. For back-office operations — book keeping, rep ort p rinting, record changes — the same type of video display terminal is used in conjunction with medium-speed printers of 60 or 120 characters a second or a line print er that operates at up to 300 lines a minute. Controlling the branch function is the Bunker Ramo PCU minicomputer with integral program memory of up to 256K bytes. It now offers the new plug-in math processor to accelerate local calculation and the advanced memory-expansion feature, which in crease overall throughput by about 20%. The minicomputer also serves as a control unit for communications with the bank’s mainframe computer, when access is required. Mass storage for operating data is provided by a floppy disk unit or the new Winchester-type rigid disk. Initial deliveries of ADTRAN ap plications modules will begin in the fourth quarter of this year and will be offered on a license-fee basis. • • J MID-CONTINENT BANKER for July, 1981 CORRESPONDENT QUIZ 1. Who has the fastest-growing Correspondent Bank: Department in the South? 2. Who was the first to offer seminars on new hanking 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 hig 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 July, 1981 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Selling /Marketing Fifth-Anniversary Party Held for 'Dimension 60' More than 3,000 people attended the recent fifth-anniversary celebra tion of the Dimension 60 Club, an organization sponsored by First Mid west Bancorp., St. Joseph, Mo., for customers who are age 60 or more. Club members gathered at the new Civic Center arena to witness a pre sentation by “Up With People,” a 90member, world-traveling singing and dancing troupe. A buffet reception also was held. Jacob M. Ford II and Roger Hegarty, chairman and president, respec tively, of F irst M idw est Bancorp (FMB), presided over a formal cham pagne-toast ceremony for Dimension 60. A survey that showed the bank HC’s market area to have a large number of persons over age 60 first sparked the idea for the organization back in 1976, according to Gary Mowrey, FM B marketing director. To qualify for membership, any per son age 60 or older must have a savings account or CD at any of F M B ’s eight facilities in the St. Joseph area. Mem bership entitles a customer to free financial services, educational semi nars, travel packages and discounts on merchandise through more than 130 participating retail outlets. Club membership has increased steadily over the past five years, Mr. Mowrey says, but the special fifthanniversary cele b ra tio n and an NOW-Accounts Seminar Is Offered by ABA To Be Used by Banks Jacob M. Ford II (I.) ch., First Midwest Ban corp., St. Joseph, Mo., offers toast to cele b rate D im en sio n 60 C lu b 's fifth anniversary. Assisting are Gary Mowrey, marketing dir., and Virginia Stephens, marketing dept. “advertorial” page printed in the local newspaper after the event boosted in terest even more. An advertorial is a full-page ad that’s made to appear as a page of editorial matter — all articles deal with Dimension 60 Club activi ties. The club now has more than 6,600 members. We held this special anniversary at the arena to show our members how much we apreciate their participation and to demonstrate to everyone that we plan to support this group for a long, long time to com e,” said Mr. Mowrey. Selling NOW (negotiable-order-ofwithdrawal) accounts is not easy, as many banks are finding out. And the blame doesn’t lie only with thrifts and Regulation Q, as the ABA points out in announcing an in-bank training pro gram designed to help educate cus tomer-contact employees on NOWs. It’s called “NOW-Accounts Seminar for Customer-Contact Personnel.” Bank customers, says the ABA, rely on customer-contact personnel to ex plain bank services, but if a bank’s front-line employees don’t understand NOW accounts fully, the bank and its customers stand to lose. The three-hour seminar’s objective is to help front-line bank employees increase their understanding of NOW accounts so they can better explain the service accurately and effectively to bank customers. The program pro vides a historical and legislative over view of NOW accounts and explains federal requirements, pricing and the impact NOWs have on a bank’s opera tions and marketing functions. Stu dent materials also feature commonly asked customer questions and sample answers and practical self-study ques tions to help employees learn specific bank policy and procedures. The seminar, a complete in-bank training program, may be incorpo rated into a bank’s teller-training pro gram. The ABA also encourages bank ers to contact their local AIB chapters to see whether they plan to sponsor the seminar. The seminar leader’s guide contains a lecture outline, role-play exercises, reference materials and a bibliogra phy. To order this guide, request pub lication No. 626201 from the ABA’s order-processing departm ent. The cost is $7. Student handbooks, pub lication No. 626200, are $3 each. For additional information, write: Kathy Fedge, Education Policy/Development Group, ABA, 1120 Con necticut Ave., N .W ., Washington, DC 20036. Portion of more than 3,000 Dimension 60 Club members attending recent fifth anniversary celebration of club in St. Joseph, Mo. Inset shows "Up With People" troupe that entertained club members. 12 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis MID-CONTINENT BANKER for July, 1981 American Bankers Enjoy Smooth Sailing With Harlands Shipshape Checking Service. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis H arland, T h e G reat A m eric a n C h e c k Printer, s m T hirty -F o ur C o n v e n ie n t Facilities F ro m S ea to S h in in g Sea. H A R IA N D JO H N H H ARLAN D CO M PAN Y • C H E C K P R IN T E R S P O BO X 105250. ATLANTA. G A 30348 © HARLAND 1981 Installment Lending Survey Charts Trends in Installment Lending ERTAIN T Y P E S of consumer loans face an uphill battle in gaining the favor of a good portion of bankers participating in a survey taken at the 1981 ABA installment credit conference by Financial Underwrit ers, St. Louis. The survey revealed that 21% of re spondents state their banks will never offer simple-interest indirect consum er loans, that 17% will never offer vari able-rate direct consumer installment loans, that 27% will never offer vari able-rate indirect consumer install ment loans, that 37% will never offer direct leasing, that 29% will never offer indirect leasing and that 53% will never offer revolving credit install ment loans in place of closed-end cred it. Credit unions were seen as bank ing’s biggest competitor for install ment loans during the next two years, followed by S&Ls, other banks and fi nance companies. C RICHARD L. AIA ARCHITECT & ASSOCIATES P.O. BOX 403 342 MARKET STREET STE. GENEVIEVE, MISSOURI 63670 (314) 883-5755 BANK DESIGN SPECIALISTS ALABAMA, ARKANSAS ILLINOIS, INDIANA KENTUCKY, MISSOURI TENNESSEE 14 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Thirty-nine percent of the bankers polled expect that up to 5% of their bank’s installment loan portfolio will be in second-mortgage loans by the end of 1981, with 23% expecting that situation to develop by the end of 1982. However, 32% of the bankers expect the percentage of their install m ent loan portfolio in secondmortgage loans to be between 11% and 20% by the end of 1982. Financial Underwriters asked the following questions of participating bank loan officers.: 1. W ill your bank have simpleinterest (non-credit card) direct con sumer loans by the end of 1981, the end of 1982 or later? Fifty-one percent of the bankers said their banks already have such loans, while 15% expect to have them by the end of 1981, 13% expect to offer them by the end of 1982, 11% expect them at some later time and 8% will never offer such loans. 2. W ill your bank have simpleinterest (non-credit card) indirect con sumer loans by the end of 1981, the end of 1982 or later? In reply, 29% said they already have such loans, 9% will have them by the end of 1981, 15% expect to have them by the end of 1982, 19% will offer them at a later time and 21% will never have such loans. 3. Will your bank have variablerate direct consumer installment loans by the end of 1981, by the end of 1982 or later? Twelve percent of the banks have such loans now, while 14% expect to have them by year-end 1981, 30% ex pect them by year-end 1982, 25% will put them off to a later time and 17% will never offer them. 4. Will your bank have variablerate indirect consumer installment loans by the end of 1981, the end of 1982 or later? Only 5% offer such loans now and only 9% expect to offer them by the end of this year. But 21% expect them by the end of 1982, 33% will offer them at some indefinite time and a large 27% will never offer them. 5. Will your bank have direct leas ing by the end of this year, the end of next year or later? About one-fifth of the responding bankers said they offer direct leasing at the present time, 6% expect to add the service by the end of this year, 10% expect to start the service next year, 23% will put that service off until later and 37% will never offer the service. 6. W ill your bank have indirect leasing by the end of 1981, the end of 1982 or later? Thirty-eight percent of the bankers said their institutions offer this service at the present time and 9% will add it later this year, with another 6% ex pecting to add it by the end of 1982. Thirteen percent will offer it at some later time and 29% will never offer it. 7. Will revolving-credit installment loans replace closed-end credit at your bank by the end of 1982 or the end of 1984? Only 3% of the bankers said their institutions already have seen this change, 12% expect it to occur at their banks before the end of 1982 and 18% expect to see it before the end of 1984. Eleven percent said it could come later and a whopping 53% said their banks will never make the switch. The final question asked of bankers was, What percentage of your install ment loan portfolio will be second mortgage loans by the end of 1981 and by the end of 1982? By the end of 1981, 39% expect up to 5% of their bank’s installment loan portfolio to be second-mortgage loans, 20% expect from 6%-10% to be in second-mortgage loans, another 20% expect from ll% -20% to be in such loans, 10% expect from 21%-30% to be in second-mortgage loans, 5% expect from 31%-50% to be in such loans and 1% expect more than 50% to be in such loans. By the end of 1982, 23% expect up to 5% of their bank’s installment loan portfolio to be second-mortgage loans, 19% expect from 6%-10% to be in such loans, 32% expect from ll% -20% to be in second-mortgage loans, 9% expect from 21% to 30% to be in such loans, 11% expect from 31%-50% to be in such loans and 1% expect more than 50% to be in second-mortgage loans. Donald R. Brown, president, F i nancial Underwriters, predicts the survey results should serve as a ba rometer of the attitudes and directions contemplated by an overall large seg ment of the American lending com munity. • • MID-CONTINENT BANKER for July, 1981 THE HARRIS OVERLOAN: IF IT TAKES US OVER 3 DAYS TO CALL YOU WITH AN ANSWER, W ELL APOLOGIZE OVER A FR EE LUNCH. When you come to Harris Bank for an overloan, you’ll find we know ex a c tly w h a t you need. And exactly what you don't need. We know you need an a n sw e r. And you d o n ’t need six or seven days of sitting around the telephone waiting for it. That’s why w e’re mak ing this statement: we’ll give you an answer in three days. Or less. Or else. Or else what? Or else well explain what the reasons were over a free lunch. And not at a hot dog stand, either. Quite frankly, we don’t expect to be paying for many lunches. Because quick turnaround is one of the things we do best at Harris. In cred it m atters, and in every other kind of problem solving, from investment coun seling to a sset m a n a g e ment to economic advising. And we re able to m ake those q uick tu rn a ro u n d s with a minimum of error. So, if you need an overloan, call your Harris representative. Or call 312-461-2744. But don’t expect a free lunch. Expect an answer within three days. HARRIS CORRESPONDENT BANKING SERVICES HARRIS BANK. H a rris T ru st and S a v in g s B a n k , 111 W. M onroe St.. C h ic a g o , III. 6 0 6 0 3 . M em b er F .D .I.C ., F e d e ra l R e s e rv e S y ste m . MID-CONTINENT BANKER for July, 1981 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 15 EFTS (Electronic Funds Transfer Systems) Credit-Card Authorizations Speeded Up REDIT-CARD authorization and check-guarantee systems de signed to expedite service and en hance security in retail-business trans actions have been introduced by St. Louis’ Mercantile Trust. The systems are being marketed nationwide as Check-Point and Check-Point II by M ercan tile to local, regional and national retail operations. According to the bank, Check-Point and Check-Point II are major advance ments in electronic-banking services that go beyond traditional telephoneoperated check-guarantee services. They include authorization and veri fication of M asterC ard and Visa accounts established at any financial institution and of Diner’s Club, Amer ican Express and Carte Blanche credit cards. The operation originates from a point-of-purchase terminal at a retail business and interconnects to local and national data banks of credit-card veri fication and authorization and checkguarantee centers. O f the two, says Mercantile, CheckPoint offers greater speed and sophis tication. For completion of a retail transaction, the retail clerk inserts the customer’s credit card into the mi croelectronic reader of an electronic cash register at the specially designed Check-Point term inal. The reader transmits the credit-card information to the data control center as the cashier keys in the purchase amount. Within six to 12 seconds, the system responds with authorization and verification in formation. With Check-Point, Mercantile Trust of St. Louis' new card-authorization system, re tail clerk inserts credit card into microelec tronic reader, keys in purchase amount and receives necessary purchase-authorization inform ation w ithin six to 12 seconds. Guarantees of personal checks are handled with Check-Point II. 16 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Customer with credit card is spared long w ait in line when retail store uses Mercan tile Trust of St. Louis' Check-Point system, according to bank. In-store terminal offers equally efficient and effective guarantees for payments by personal checks, Mercan tile adds. Check guarantees are handled simi larly, except that the clerk keys in the purchase amount and the customer’s driver’s license or state-issued person al identification number. Check-Point II, M ercantile con tinues, affords the retailer and custom er equal accuracy. It incorporates an electro n ic encoding and v oice-re sponse operation. C heck-Point II credit-card verification and checkguarantee responses occur within 20 or 30 seconds. Check-Point II has been designed for the merchant who re- ceives a low monthly volume of sales by checks or credit cards. To the retailer, Check-Point and Check-Point II, says Mercantile, elim inate risks of financial losses in accept ing checks and credit cards, speed point-of-purchase transactions and en sure accuracy. The systems operate 24 hours a day, seven days a week, and information in the data banks is updated regularly. “For instance,” says C. Philip John ston, vice president and head of M er cantile’s credit card division, “when the data centers receive information of a lost or stolen credit card, it’s entered into the computer immediately.” Mercantile says the consumer also benefits because the systems eliminate time-consuming review of credit-card “hot sheets” by the retail clerk. Mer cantile points out that use of CheckPoint and Check-Point II also conveys to a good customer that his or her checks and credit card are readily acceptable at a retail outlet. Check-Point and Check-Point II are registered trademarks of Mercantile Trust and are marketed by the bank’s credit card division. • • Answer Switch of Illinois Signs Bank in Pekin Answer Switch of Illinois, said to be the first fully operational electronic banking processor to provide shared switching services to proprietary net works in Illinois, has signed up Herget National, Pekin. Answer Switch provides financial in stitutions in Illinois with computer support to enable them to offer their customers E F T services. It is jointly owned by Illinois National and Springfield Marine National, both in Springfield, 111. All transactions of participating banks through ATMs are switched by Answer Switch through an on-line sys tem with information processed in Springfield. The same data processing equipment is serving the three-county A n s w e r Network with its 15 member institutions and 100,000 debit card holders. Answer Switch was established in October, 1980, and is compatible with other statewide and nationwide E FT systems. MID-CONTINENT BANKER for July, 1981 Nobody knows New Orleans like the W hitney When you have an important customer who asks about banking in New Orleans and Louisiana, tell him about the Whitney. The Whitney, now in its 98th year, can offer your customer the same high quality, efficiency and excellence in banking that your bank has so capably provided. NATIONAL BANK OF NEW ORLEANS Established 1883 A great bank for a great city MID-CONTINENT BANKER for July, 1981 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Corporate News Roundup CROUSE KRAEMER • LeFebure. James H. Crouse Jr. has been appointed regional sales manager of LeFebure’s Indianapolis Branch. He will supervise sales and service in portions of Indiana, Ken tucky and Illinois. He previously was a sales engineer for the firm. • Brandt, Inc. William F. Kraemer, vice president/manufacturing, has been named vice president/general manager of a newly established coin products division, formed in accord ance with the firm’s plan to decentral ize management and manufacturing responsibilities according to product categories. Mr. Kraemer joined the firm in 1955. • Christmas Club a Corp. Joseph Mâcher has been appointed control ler. He joined the firm in 1974 as a cost accountant and has been assistant con troller for the past year. Offices in principal cities . . . Call ( 504) 523-5353 corporate vice president, executive sales. Mr. Bruck formerly was presi dent, Depositee, a BBC division, and has been succeeded in that post by A. D. Shiach, who also is senior vice president, consulting, for BBC. MACHER HERRICK • Associates Com m ercial Corp. David F. Herrick has been appointed senior vice president of the business loans division of this Chicago-based subsidiary of Associates Corp. of North America. He is responsible for market ing planning and development activi ties, including advertising and public relations. He formerly was with Barc lays American Business Credit, Hart ford, Conn. • Westcap Corp. Lea S. Novak has been named vice president/general counsel/corporate secretary of this Houston-based firm. She formerly was staff attorn ey, Am erican G eneral Capital Management, Inc., and corpo rate secretary of its subsidiary com panies. • Bank Building Corp. Promotions at this St. Louis-headquartered firm include Rex Dunlap to senior vice p resid en t, Bank Building Corp. (BBC), and executive vice president, Financial Facilities Group; and Gerald L. Radloff to vice president, BBC Supply Affiliates Group. New to the firm is Melvin L. Lindsey, appointed a consultant services manager for the Midwest division. Peter J. Bruck has b een appointed p resid en t, Bank Building Midwest, succeeding Allyn D. Raymond, who has been named • Republic Money Orders. Robert M. Tillinghast has been promoted to assistant vice president in the travelers check and financial institution money order sales division of this Dallasbased firm, a subsidiary of Republic of Texas Corp., multi-bank HC. • American Express. A new world wide operations and communications center for the Travelers Cheque Divi sion of this firm now is under construc tion in Salt Lake City and is scheduled to open in the third quarter of 1982. The $35-million facility will handle all processing for A m erican Express travelers cheques and house the tele phone refund service center. The cen ter is located on a 52-acre site and will include three buildings. Douglas-Guardian Warehouse Corporation P.O. Box 52978 New Orleans, LA 70152 BRUCK 18 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis SHIACH LINDSEY DUNLAP RAYMOND RADLOFF MID-CONTINENT BANKER for July, 1981 Get to know your Com m erce banker. Frampton Rowland joined Commerce in 1963 after studying at Indiana University, Oklahoma and K-State, and stints with the U.S. Army Medical Corps and a large finance company. Now he’s an experienced Calling Officer for our Correspondent Department. Whatever your needs, Frampton Rowland can help. David Scott joins Commerce’s Correspondent Bank Division with eight years experience in bank operations. You can rely on him for sound advice on operational questions. David has a total of 16 years service with Commerce, having worked his way up from mail clerk to his current position of assistant vice president. During this time he also spent three years in the military and earned a B.A. from Rockhurst College. He is a Kansas City native who enjoys tennis and snow skiing. H.C. Bauman went to William Jewell College. Before joining Commerce in 1975, he was chief executive officer of a Kansas City area bank. Today, he heads up our Correspondent Department. This former Air Force captain enjoys racquetball and tennis, as well as help ing you with all your correspondent re quirements. Look for him soon. We’re th e lea d in g co rresp o n d en t b a n k in th e M idw est. What can we do for you? vtvCommerce Bank of Kansas City o 10th & Walnut MID-CONTINENT BANKER for July, 1981 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis onnn 816/234-2000 M EMBER FDIC •>' 19 The Banking By Dr. LEWIS E. DAVIDS Illinois Bankers Professor of Bank Management Southern Illinois University, Carbondale Creative Financing of Student Loans HE TRACK record of federally fi nanced and even state-financed student loan programs is far from a happy one. While the overall record is dismal in that hundreds of thousands of recipients have defaulted, the record is even worse in Texas and California. To set the scene, until recently there has been a feeling that the educa tion of college students should be sub sidized; that is, students should re ceive a lower than normal interest rate and the subsidy should be picked up by either the federal or state govern ment — which means us, eventually. A subsidy tends to be a subjec tive evaluation that a certain education or occupation is more in the public interest than other occupations. A paradox exists in that many of those paying taxes and thus subsidiz ing student loans didn’t to go college and are, through their taxes, subsidiz ing better-educated citizens. This is especially true if thought of in terms of certain occu pations, such as the medical or dental profession. Incomes received by medical doctors and den tists are many times the average salary earned by most college graduates, and many more times the average income of non-college people. Thus, why should the education of individuals who will be in the upper decile of per sonal income be subsidized? Some people think, however, that since college-educated people will be earning above-average incomes, they will be paying above-average taxes. Therefore, over their lifetimes, they will reimburse the government and society for subsidies received. A subsidy tends to be a subjective evaluation that a certain education or 20 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis occupation is more in the public in iterest than other occupations. Yet a study of subsidizations shows that quite te frequently subsidization is a politicallyy motivated pandering to certain in iterests, generally to the detriment of ff the average man or woman. College-education costs have beenn going up faster than real disposablee income. Some medical schools now aree charging in excess of $15,000 a year.r. (Incidentally, that is almost as much as is the cost of keeping a felon incarcerated d in a federal penitentiary.) While thee cost of other types of college educationn isn’t as high as that of medical schools, still it’s substantial. I personally know of several instances where professors y have advised college students to apply for subsidized loans even though theirr family income or wealth was such thatlt a loan wasn’t needed. The young peo j ple were instructed to borrow aid funds and invest them at high interest;t rates in the market. Many college stu dents have done this. ;Many who have graduated and be 1come employed have found that col lection efforts by creditors have beenn iso minimal that there has been no com pulsion to make loan payments. A scandal in the Department of Health,l, Education and Welfare developed a it year or so ago when it was learned that many H EW employees had renegedd on payment of their student loans. >L et’s face it, the student-loan pro d gram, as it has operated in the past and as it currently is operated, is a disaster.r. h Is there a better way of handling such an operation? I think so. But beforee mentioning the system I advocate, I d will note that there is little likelihood the government would support such a program . H ow ever, for what it ’ss worth, here it is. iThe typical student wanting finan icial assistance would apply to the stu dent loan officer at his/her college. Thee student would sign a standard type of ff al agreement that had some additional features. One would tie the interest rate on the loan to some index so it would fluctuate along with prevailing rates. The second — and perhaps most controversial aspect — would be a voluntary request by the student to instruct the Social Security Administration (through a to-be-formed subsidiary) to provide that, on the student’s employment, his/her salary be garnisheed by a reasonable amount, The amount of garnishment would be collected along with the individual’s social security tax payments, The student loan also would be tied The fact that loan payments would be accelerated should a student drop out of college could be a strong motivator for serious study. to a series of insurance policies, including credit life and accident and an employment-contract policy. Premiums would be paid by the student in the same way the payment of principal and interest would be made on the loan, Loans could be packaged in denominations that would be attractive to many classes of investors. Because the loans would be competitive with the market rate and tied to the automatic garnishment provision and supported by appropriate insurance, they should be attractive in the free market place. The endowments of many colleges could be tapped to buy these earning assets. Thus, universities wouldn’t be subjected to diminishing endowments but, rather, with endow ments that would be growing at a compound interest rate commensurate with prevailing rates, There would be some additional safeguards that opponents probably (C ontinued on page 70) MID-CONTINENT BANKER for July, 1981 Corespondent W henyou want a complete guide to correspondent services, think Bank ofAmerica* Our free 16-page brochure tells it all. And explains just how Bank of America can help your bank or holding company with various correspondent services to meet the challenges of the 1980’s. In addition to credit and financial serv ices and asset-liability management tools, we offer clearing and operational services and international and trade finance assist ance, as well as marketing and economic information. To obtain our brochure, just ask your Bank of America representative, or com plete this coupon and mail it to us. Bank of America N T & SA https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis To: Bank of America NT >&.SA Financial Institutions Group, Dept. #5179 HO. Box 37000 San Francisco, CA 94137 Please send me a copy of Bank of America’s Correspondent Banking Serv ices brochure: Name: Bank or Holding Company: Address City/Sîate/Zip:. B A N K of AMERICA Correspondent Banking Services Bankers Assail Regulations That Prevent Competition on 'Level Field' With Firms Offering Financial Services W AS it only yesterday that com mercial banks saw as their big gest competitors S&Ls, mutual sav ings banks and credit unions? Was it only yesterday that commercial banks were demanding “a level playing field” on which to compete with these other financial intermediaries? Such worries seem obsolete now in light of the advent of money-market mutual funds (MMMFs), which are taking billions of dollars out of the com mercial-banking system. Then, more recently, competition took a new — and to some bankers, more frightening — turn in the form of an announced merger between Amer ican E xpress and Shearson Loeb Rhodes, acquisition of the Bache Group by Prudential Insurance Co. and Equitable Assurance Society’s re quest to the New York state insurance department for permission to offer a “broad-based cash-management sys tem .” All these developments, when and if consummated, will open the door to banking to the firms involved. Yet, as many bankers are quick to point out, commercial banks are restricted from climbing over their regulatory walls into areas such as municipal revenue bonds and MMFs. A St. Louis banker, Neal J. Farrell, president, Mercantile Trust, pointed out — at his bank’s 26th annual corres pondent banking conference — that external forces, not free competitivebanking practices, are reshaping the financial and capital markets and sys tems of our nation. This is being done, he continued, with little or no recogni tion or definition as to what the ulti mate effects of these profound changes will be on the national economy or on a single individual’s personal manage ment of his own financial affairs. Then, he recounted the following: • American Express and Shearson Loeb Rhoads’ announced m erger, which will give the two firms com bined assets of more than $6.6 billion and combined services of charge cards, travelers checks, travel agencies, cable TV (including two-way cable TV cap able of handling retail banking and other financial transactions), maga zines, money orders, insurance, retail banking services for wealthy custom ers and corporate and investm ent banking services from American Ex press. He said this new entity’s channels of distribution will include 10,000 inde pendent agents selling insurance, 736,000 cable subscribers in 27 states, a phone order-taking service handling 8,000,000-10,000,000 calls a year and a credit-card-processing network han . . the commercial-banking system, by legislative, regulatory and . . . political forces, is being prevented from offering, or even from considering offering, similar new services and products to its customers and the bank ing public on anything resembling an equal basis with our nonbanking competitors/" — Neal J. Farrell. 22 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis dling 12,000,000 accounts for 3,800 financial institutions of American Ex press. • Prudential’s $385-million acquisi tion of the Bache Group. Prudential, the world’s largest insurance firm, has 25.000 agents in 1,200 offices. Bache, said Mr. Farrell, has 3,000 brokers in 200 offices and $284 million in capital. • Equitable Life Assurance Society is ready to go nationwide if it receives the requested permission to offer a cash-management system. Mr. Farrell said Equitable already has an electron ic clearinghouse network to collect premiums automatically from about 300.000 life insurance policyholders, and it runs a cash-management system for company use. Last fall, the firm entered the M M M F business. “Now, don’t misunderstand,” Mr. Farrell told the correspondent bank ers. T am not saying these new finan cial products and services or the non banking institutions that offer them are, in themselves, bad or dangerous. Quite the contrary. Many, if not all, provide new opportunities for financial service and meet the needs of count less individuals, corporations and in stitutions. “The point is, the com m ercial banking system, by legislative, regula tory and, if you will, political forces, is being prevented from offering, or even from considering offering, similar new services and products to its customers and the banking public on anything resembling an equal basis with our nonbanking competitors.” In discussing these new mergers and acquisitions with representatives of M id - C o n t in e n t B a n k e r , Mr. Far rell compared them with the throwing of a rock into a lake. Right now, he said, bankers can’t tell how big the rock is nor how wide the circle of waves it is creating. He believes the rock is small at the moment because these firms don’t want to stir up Congress to the point of passing restrictive legisla tion on their “bank-like” activities. Ultimately, though, he continued, MID-CONTINENT BANKER for July, 1981 they will be throwing big rocks; that is, they will be offering more and more bank-like services, which will create ever-widening waves. He believes these waves, in turn, will upset an in creasing number of boats (banks) un less the latter can compete with non banking firms on an equal basis. As Mr. Farrell put it in his speech at the correspondent banking confer en ce, “ W hy is the co m m ercia l banking industry being hamstrung and severely handicapped in helping to provide new services and new prod ucts to new and existing markets? And, especially, why are we virtually being excluded from this process when the public need for new and innovative financial services is more critical than perhaps ever before?” Mr. Farrell believes this new chal lenge to banking will be met, but the question is how it will be met. He added that the future well-being of the national economy requires a strong commercial-banking system as an in termediary for total economic prog ress. He warned that bankers cannot permit a breakdown in this vital cog of our economic machinery. “We can start,” he advised, “by making an individual commitment to make our unified voice heard more strongly and effectively than ever be fore. Our resolve and ability to do just that are the basic issues facing banking today. ” S corecard N eeded. In today’s finan cial ball game, it’s hard to tell the play ers even with a scorecard. That’s the way W alter B. Wriston, chairman, Citibank/Citicorp, New York City, put it in a speech he gave to the Securities Industry Association in New York City. He said that yesterday’s image of a financial-services business bears lit tle relationship to today’s reality. “Actual events of the financial Legislation created years ago by Glass and Steagall "and their friend McFadden" as a wall to keep people out of banking's fort today is serving an entirely different pur pose. All it does now is keep bankers locked inside while everyone else with imagination and drive harvests cash crops growing beyond the stockade. — Walter 8. Wriston. world,” said Mr. Wriston, “are con fused with the image of what used to be. The image is that banks are places to deposit money and get loans; that brokerage firms are places where securities are bought, sold and distrib uted; that thrifts are places to maintain savings and obtain mortgages. Yet the reality of the actual events taking place is that computers, satellites, electronic funds transfer mechanisms, microcir cuitry and high-speed optical tele phone lines are eliminating constraints of tim e, geography and volume in financial transactions. A man in Texas takes his money out of an S&L, calls a toll-free telephone number in Arizona, and his money ends up in a moneymarket fund in Boston — or anywhere else on the globe. “The financial marketplace today is everyw here, any tim e. Parties to transactions could be anyone with the ability to punch in the right numbers anywhere. Financial transactions now are being performed in living rooms via cable TV or through a terminal in a corporate treasurer’s office. What will be the value of a seat on the New York Stock Exchange or a brick-and-mortar bank branch in an environment where every home has access to the Dow Jones and its bank accounts instan taneously? In that kind of world, elec trons have become money, credit, securities or savings and are more real than places.” Mr. Wriston pointed out that people down on the farm are withdrawing their money from savings accounts and buying money-market funds. These funds have done away with isolated pools of liquidity, since they invest not only in Treasury and U. S. govern ment agency securities, but also in large negotiable CD s, commercial paper and Eurodollar CDs. Deposits, according to Mr. Wriston, are crossing state lines and international bound aries and ending up in other banks, whether McFadden likes it or not. Mr. Wriston said that money-mar ket funds — essentially high-interest bank accounts for small savers — are the unique offspring of the marriage between Reg Q and the toll-free tele phone, with inflation and technology serving as matchmakers. He illus trated these funds’ growth by saying that it took Citibank 114 years to accumulate $1 billion in deposits, but in January and F eb ru ary , 1980, money-market-fund assets grew at the rate of almost $8 billion a month and in May of that year by more than $9 bil lion. In another speech, Mr. Wriston said legislation created years ago by Glass and Steagall “and their friend McFad den” as a wall to keep people out of Bankers speaking out on competitive lockout on these pages include (from I.) Neal J. Farrell, president, Mercantile Trust, St. Louis; Walter B. Wriston, chairman, Citibank/Citicorp, New York City; Martin C. Miler, chairman/CEO, Hibernia National, New Orleans; John H. Perkins, president, Con tinental Illinois National, Chicago; and Frank B. Hower Jr., chairman, Liberty National, Louisville. MID-CONTINENT BANKER for July, 1981 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 23 "The marketplace is unremitting in its quest for innovation of desirable services, price competitiveness and reward. That marketplace, like water, seeks the fastest, shortest and least resistant route to sea level and will not be denied by regulations and restraints that are unnatural inhibitors to the free and compelling force of its desires and needs." — Martin C . Miler. banking’s fort today is serving an en tirely different purpose. All it does now, he continued, is keep bankers locked inside while everyone else with imagination and drive harvests cash crops growing beyond the stockade. “What is harder to understand,” Mr. W riston w ondered, “is why, whenever parts of the wall show signs of crumbling, bankers themselves are first on the scene to mortar it up. And no one ever seems to notice that the circum ference of Fortress Banking keeps getting smaller and smaller. In 1946, we had a 57% share of financial assets of the country; in 1979, it had shrunk to about 38% — and it is still shrinking.” People on the outside of the wall — M errill Lynch, Sears, G .E . Credit Corp. — are doing only what a market economy demands, said Mr. Wriston. All they are doing is giving the ordi nary consumer a competitive return on his money, and there’s nothing wrong with that. Mr. Wriston believes that what’s wrong is the governm ent’s attempt to prevent it. And, he added, if bankers encourage these attempts, as many have, then, as Pogo said, “The enemy is us.” “All attempts to protect our Fortress Banking will fail, ” he prophesied, “be cause new technologies like telecom munications and data processing have provided the means to give everyone equal access to the free money mar kets, and inflation is furnishing the in centive to go there. That’s what plastic credit cards and toll-free 800 numbers really are all about. The trend cannot be halted because the public, in this age of consumerism, no longer will accept the inequities. Banks cannot be sheltered from this competition; they can only be banned from participating in it. Indeed, it is useless to anticipate, if we are forbidden to act. And if we do not participate, we are finished as financial intermediaries. It may not be an exaggeration to say that our very survival in the year 2000 may entail giving up our banking charter, if our laws and regulations do not change.” Mr. Wriston sees the question as we 24 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis enter the 1980s as not how many peo ple will climb over the wall into what bankers believe is “their” market, but whether bankers will allow themselves to climb over that wall, out into the sunlight where the customers are. “Prince” or “F ro g .” Martin C. Mil er, chairman/CEO, Hibernia Nation al, New Orleans, believes events such as the announced mergers of American Express/Shearson Loeb and Bache/ Prudential are precursors of highly gal vanic changes in store for the financialservices industry. As he puts it, “The 1980s are the decade when that snoozing prince will awaken. In 1990, you will know whether you have a handsome stalwart or a bleary-eyed frog. “ Such m ergers, as symptoms of these changes, should be highly ben eficial to banking providing bankers themselves and legislators do not pre vent it from being so. Bankers might prevent it, in part, because of their tragic paranoia against change and against competition. Legislators may do it because they either refuse to face the tide of change or are held hostage by special interests that seek to erect a concrete edifice as a shrine to the sta tus quo.” Mr. Miler believes that if the statusquo bankers and legislators prevail, the banking industry will hemorrhage and thrash like a beached whale that has fallen victim to the harpoons of change. “If they prevent intrastate banking, as they have in Louisiana,” Mr. Miler continues, “and interstate banking on a regional and national scale, then the American financial landscape will be littered with corpses of banks run by bankers who repudiated change and competition and unwittingly forced annihilation of their institutions. “The marketplace is unremitting in its quest for innovation of desirable services, price competitiveness and reward. That marketplace, like water, seeks the fastest, shortest and least re sistant route to sea level and will not be denied by regulations and restraints that are unnatural inhibitors to the free and compelling force of its desires and needs. “Deregulation of artificial-rate con straints and geographic competitive restraints is required, along with the right to operate and advertise invest ment money funds, to underwrite rev enue bonds and to compete in the financial arena with both hands free. These clearly should be some of the ambitions of bankers. Sadly, too many bankers choose instead to say, ‘Stop the changes,’ ‘Handcuff those preda tory innovators’ and ‘Stop allowing such competition.’ This hardly is the behavior expected of princes and is much more on the order of frogs that are on the verge of being gigged, after which their legs are ceremoniously de voured.” Mr. Miler closes by warning that if his words seem direct and harsh, “they are nothing compared to the reality of the 1980s, if bankers fail to awaken both themselves and legislators by acting like princes instead of proclaim ing ‘ribbit’ from their respective lily pads.” R eco g n iz in g th e m o d e r n tr u th . Freedom from constrictive and in effective regulation is proposed by John H. Perkins, former ABA presi dent, and president, Continental Illi nois National, Chicago, as a solution to the competitive situation banks find themselves in. “Too often we tend to see competi tion as a dark cloud, when we should be concentrating instead on the bright er lining it carries in the form of poten tial benefits for commercial banks, ” he said. He pointed out that nonbank finan cial intermediaries have shown con sumers a most impressive array of ser vices and they operate with virtually no geographical or regulatory impedi ments. He added that the well-worn recital of what these unregulated com petitors are doing hardly needs repeat ing. “With artificial restraints on de pository institutions, market forces have taken over and moved ahead with such new devices as money-market funds. “At the same time, large banks, oil companies, retailers and others are issuing credit cards nationwide. Many banks are opening loan production units and Edge Act offices. Foreign banks are entering all major cities en masse, much as American banks went abroad a number of years ago. ” This evolving competitive picture, he said, carrying with it structural changes in the industry, is making it more and more publicly evident that (C ontinued on page 71) MID-CONTINENT BANKER for July, 1981 ST national} BANK OF SPRINGFIELD DOWNTOWN- 1 We're proud to be the first bank in the CIS. to introduce this ex citing, innovative banking prod uct — "The First Money Market Account." FMMA lets you enjoy the financial benefits offered by high rate, short-term money mar ket funds on Wall Street but with the convenience of banking right here in Springfield. High fixed rate repurchase agreements with 30 • 89 day maturities are also available. Investors depositing an initial $15,000 have the means to achieve high current yields on their short term funds plus the convenience of a bank checking account. Funds are automatically placed in the money market in strument which you select. Addi tionally, an automatic $5,000 line of credit will be available to provide you with a convenient reserve. L STREET > , 929 MILES INTRO DUCING Free Investment Checking While our FMMA requires a min imum initial deposit of $15,000, the funds are continuously in vested as received, plus you have the checking convenience of writing a check for a minimum of $500 anytime against your acReserve Cash M(apiy M arket Account High Yield Money Market Rates with Investment Checking Convenience from OUR BANK Unlike most money market funds, FMMA transforms regular money market funds into six distinctive investment alternatives. You can choose from variable rate, taxable or tax-exempt money market funds, or a fixed rate repurchase agreement of 30 - 89 days. First Nat'l, Springfield, III., is using this ad to tell public about its "First Money Market Account" (FMMA), high-yield instrument bank created to compete with moneymarket-mutual funds. A Reserve Cash line of credit is designed to cover checks against your account pending receipt of funds from your investment ac count on the next withdrawal date. Your account includes an automatic $5,000 Reserve Cash line of credit; however, you may also apply for a higher line if desired. ' Banks C reate Program s To Com pete Against M oney-M arket Funds All This for a Minimal Fee Along with an annual $20 ac count fee, a monthly fee will be charged based upon your aver age account balance. By Rosemary McKelvey, Editor We encourage you to contact a Personal Banker ie of our two locations: Fifth & Fifth & Cook Banking Center. Any PersonAdams answer any additional questions you might al Bankt What's more, available funds in your account are invested twice weekly in the FMMA you select. Income earned may be automatically reinvested, deposited monthly to any FNB account or mailed to you. FIRST NATIONAL BANK OF SPRINGFIELD some time: They are losing deposits to SU R V E Y of m oney-m arketmutual funds (M M M Fs) con these funds, and, as a result, money invested in M M Fs is leaving their ducted for the ABA by the Unidex communities. Corp. showed that 70% of respondents However, bankers are not just lying invested funds in MMMFs that other down and playing dead. Instead, many wise would have been held in deposit of them are starting to fight back with instruments; 46% said the primary money-market-type accounts, moneysource of the money invested in such m arket n otes, cash-m anagem ent funds was money that would have been accounts. held in regular savings accounts. This F o r in stan ce, F irst N ational, survey, consisting of 1,643 telephone Springfield, 111., has introduced a new interviews of consumers nationwide, investment account that allows cus was made between April 21 and May tomers to invest funds automatically at 31, 1981. high current short-term rates in either In a similar survey made in June, 1980, almost 55% of respondents said a variety of money-market funds or in a their primary source of M M F invest fixed-rate repurchase agreement. Chi cago’s Continental Illinois Corp. has ment money was deposit instruments. This, says the ABA, would tend to indi proposed a public offering of $100 mil lion of money-market notes, a new cate that much of the recent growth in M M F assets has been at the expense of type of floating-rate-debt security. C ity Bank, in P resid en t Ronald depository institutions. Further, as Reagan’s boyhood hometown of Dix answers to one of the questions indi on, 111., and Landmark Bancshares, St. cate, 47% of respondents said they Louis, have begun offering CDs of would have kept more funds in bankdeposit accounts if they had not in $100,000 or more with interest rates tied directly to the prime rate. Bank of vested in MMFs. On the other hand, Ravenswood, Chicago, has introduced continues the ABA, only 17% of re spondents cited investment in stocks/ a high-yield account with interest rates tied loosely to short-term Treasury-bill bonds as the source of funds, casting doubt on the investment company in yields. Still another Illinois bank, Mor dustry’s claim that MMFs are primari ton Community Bank, offers a moneymarket-type account. ly a “parking place’’ for funds between F irst o f S p rin g field . This Illinois investments. bank now offers the First MoneyThis survey reinforces what most Market Account (FMMA). With an ini commercial bankers have known for A MID-CONTINENT BANKER for July, 1981 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis tial investment of $15,000, a customer can select one or more variable-rate, taxable or tax-exempt money-market funds or a fixed-rate repurchase agree ment with a maturity of 30, 60 or 89 days. The account also includes the convenience of writing a check for a minimum of $500 against the account at anytime and has an automatic $5,000 reserve-cash line of credit. The bank’s chairman/CEO, Walter R. Lohman, points out that deposits in FMMA are not insured by the FD IC ; however, deposits in FMMA accounts not invested are insured by the FD IC . Investments are made twice weekly — Tuesday or Thursday — in a moneym arket in stru m en t the custom er selects. Additional investments can be made in $100 minimums. The repurchase agreement repre sents a fixed rate for a specified num ber of days and is collateralized by a Treasury or federal agency security. The bank, as issuer, agrees to repur chase the security on the specified date or surrender the security. Subsequent deposits can be made in $1,000 mini mums or repurchase agreements. Custom ers may withdraw funds merely by writing a check for a mini mum of $500 against their accounts anytime. There’s no charge for the first five checks written during the month. However, the customer would pay a (Continued on page 56) 25 One-Stop Shopping, Anim ated D isplay M ake for Abundant G oodw ill For Boatm en's Affiliate at Christm as T ISN’T every bank that offers onestop shopping for the family at Christmas time — in addition to pro viding a charming setting for gift trans actions, one that is practically guaran teed to thrill all members of the shop per’s family. But this is what Boatmen’s Bank of Concord Village, Mo., did last year, and, in so doing, made a lot of custom ers and non-customers happy, helping to put them into the right mood for Christmas festivities. The bank is an affiliate of Boatmen’s Bancshares, St. Louis-headquartered HC. It was appropriate that the items the bank offered shoppers had to do with money — crisp bills — the bank’s stock and trade. But the gifts weren’t just ordinary items that were purchased by the bank and sold to its customers. These gifts were difficult to find any where else and it took some doing on the part of bank employees to offer them because each was hand made by an employee! In order to know how to make these gifts, bank employees had to learn the art of origami, a Japanese word mean ing “paper folding.” The bank offered its customers a choice of six origami gifts, each of which was folded on-site I Sign includes samples of each of six Christ mas gifts made of folded currency offered by Boatmen's Bank of Concord Village, Mo., last December. Jumping frog and biki ni swim suit (Nos. 1 & 4) were most popular items. Gifts also were available at bank's facility. by employees who had studied a book from the public library on the art of paper folding. Customers had a choice of a bow tie, a string tie, a decorated Christmas tree, a ring, a bikini swim suit or a jumping frog. The Christmas tree was adorned with bits of glitter decoration from a local hobby shop and the frog jumped because it was folded in such a way that it hopped after its backside was depressed and released by a hu man finger. Each gift was made from a piece of new currency of any denomination. Surprisingly, few customers wanted gifts made from $1 bills; rather, they chose ten and even one hundreds, according to David V. McCay, president/chief operating officer, who thought up the idea for the gifts. Some customers requested five hundredand one thousand-dollar bills, and were surprised to learn that such bills are no longer printed by the Fed, thus, can’t be obtained wrinkle-free. Boatmen’s announced the availabil ity of the gifts right after Thanksgiving and offered them through the month of D ecem b er. M ore than 500 w ere purchased at a cost of $2 each, plus the amount of the denomination of the bill used in making each gift. Six employees were kept busy mak ing the gifts in the board room during slack moments, Mr. McCay says. Cus tomers were asked to wait one week for delivery, to assure adequate time to fill their orders. Mr. McCay hopes to cut down on the waiting time this coming Christmas season and feels this can be done now that the bank has a track record on how popular each gift is. The bikini swim suit and the jump ing frog were the best sellers. The biki ni came in two pieces. Each gift came Overall view of Christmas display in lobby of Boatmen's Bank of Concord Village, Mo. Two bear cubs on teeter totter at left are featured on cover of this issue. They stole the show! Display w as lighted at night and could be seen from busy highway. 26 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis MID-CONTINENT BANKER for July, 1981 “It’s a happy theme -w ith everything happily going for you! All the materials are ready right now for the launching of your 1982 Christmas Club. It’s not so far away, you know! You can get this colorful folder full of coordinating materials just by writing today, or call toll free.*” Your 1982 Christmas Club pow er p ack includes Coupon Book, Carol Book, Cut-out Application, Member Envelope, Christmas Club Check, Window Envelope, Soft-sheet Poster, Statement Enclosure, Shopping & Christmas Card List, Application Folder, Teller Badge, Easel Display Cards, Pocket Calendar.. .selected and market tested Premiums. cbR istm as club a corporation The Original *Ms. Renée Brett: (800) 523-9334 New York, New Jersey, Maryland, Delaware; (800) 523-9440 all other states except Pennsylvania; (215) 258-6101 Pennsylvania residents. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis © 1981 C hristm as C lu b a C orp o ratio n , E aston, PA. P.O. Box 20, Easton, Pennsylvania 18042 This coordinated collection was specially selected to excite. Inspired by the magnificence of French cuisine, our collection includes three proven performers: Beautiful and fresh Spring Blossom fine ch in a; sparkling French lead crystal with faceted accessories; and finally, Corning ware" French White™ cookware. At Salem, we're prepared to offer you a variety of programs tailored to meet your needs and designed to target your particular objectives. W hether it be https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis to g enerate low interest deposits, M oney Market Certificates, or N.O.W. accounts, we have more proven com plete programs to choose from and more pro motional experience to depend on. Let us plan a program for you from our French collection . We can help you co m b in e flair with savoir-faire. For m ore information write or phone Jay H. Keller The Salem China Co. 1000 SOUTH BROADWAY, SALEM, OHIO 44460 216/337 8771 in a gold box bearing a Boatmen’s seal. It’s difficult to secure fresh bills from the Fed during the holiday season, so Mr. McCay had the bank stockpile fresh currency during the months be fore the gift offer was made. A large ad was published in the St. Louis daily newspapers and in shopper weeklies throughout the promotion. The promotion paid for itself, due to the $2 charge, Mr. McCay says. An anim ated C hristm as display featuring three Christmas trees, Mr. and Mrs. Santa Claus and a number of lifelike animals, dominated the bank’s lobby throughout the month of D e cem ber. The display was obtained through a floral supplier and was placed inside the bank’s large windows that face a busy highway, attracting people as they drove by. Families came in groups to see the display and kids were thrilled to stand and watch every part of it. Mr. McCay isn’t one to do things without a bit of fanfare. The bank’s Christmas promotion was launched outside the bank in the parking lot of the shopping center in which it’s lo cated. Santa arrived in a helicopter that attracted lots of attention — of course, the public had been alerted to his arrival. Santa officially opened the Christmas season at the shopping cen ter and he naturally made a point of leading the public into the bank to see the Christmas display and promote the folded-money gifts. Mr. McCay says all the merchants in the shopping area are pleased to cooperate with the bank in staging spe cial events of this nature. It’s usually difficult to measure the benefits of a Christmas promotion, but Mr. McCay says new account activity was “tremendous” during December and the bank lobby was never busier. It’s no wonder that the bank plans to repeat its Christmas promotion this coming December! • • K id 's-eye v ie w of portion of animated Christmas display in lobby of Boatmen's Bank of Concord V il lage, Mo., last De cember. Display will be fe a tu re d th is coming holiday, too. Capsule Comment: Financial in stitutions are expected to continue to push hard to create new debt as in terest rates rise, said Henry Kaufman, executive partner, Salomon Brothers, New York City, at a recent talk to the National Press Club in Washington. He also said he expects the securities industry to use all its ingenuity to de velop many new credit instruments to drive the credit-creation mechanism forward. As a result, he said, “the gap between classically defined money and debt and nominal GNP will widen un til an excruciatingly high interest-rate level crunches the operating decisions of some in the real world.” MID-CONTINENT BANKER for July, 1981 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 66th Annual Convention BMA is Coming To Washington September 13 16,1981 - The Washington Hilton Washington, D.C. For complete program and registration information, call ToU-free 800/621-0660 (in Illinois call 800/572-0444) or write to Shirley Antenucci, Convention Registrar. (X ) 309 West Washington Street Chicago Illinois 60606 29 Christmas Clubs Provide Low-Cost Funds For National American, New Orleans a - C ja .^ ja .K ^ L t s ^ O W -C O ST F U N D S are the dream of every banker in these days of rate volatility. The problem fac ing many bankers is how to turn their dreams into realities. N ational A m erican Bank, New Orleans, knows how. It expects an esti mated $3.8 million in lower than pass book-rate funds to flow into its vaults this year from almost 18,000 indi viduals who have signed up as Christ mas Club account holders for 1981. “W e’ve found one of the best ways to get low-cost funds is to establish National Am erican as the leading Christmas Club commercial bank in the New Orleans area,” says Frank Castagna, vice president. And Nation al American has been working hard to be on top in that category. Total dollar amounts for Christmas Club accounts for the past few years have been impressive — and growing. For instance: the 1979 total was $3.3 million; the 1980 total was close to $3.4 million. The estimated figure for 1981 — if achieved — will be a record setting $3.8 million, an approximate 12% increase over 1980. Total signups for the 1981 year hit a new high — almost 18,000, about 1,400 more than last year, amounting to better than an 8% increase. Accord ing to a representative of Christmas Club a Corporation, National Amer ican Club deposits rank among the largest in the southern region. But how does a bank go about gain ing the top spot in the Christmas Club category, especially when every finan cial institution is actively soliciting low-cost deposits? National Amer- This crystal design petal bowl w as last year's Christmas Club premium offered by Nat'l American, New Orleans. Bowl is suit able for holding fruit, serving salads, chips or dips. 30 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis ON THE CO VER O ffice of Nat 1 A m erican, New Orleans, was decorated for Christmas in middle of summer so TV commer cials could be filmed for bank’s Christ mas Club promotion for following year. Announcer holds placemat pre mium that bank offered to those sign ing up for Christmas Club accounts for 1980. ican’s promotion begins each year about October 15 with an initial mail ing of about 20,000 statement stuffers calling attention to the establishment of new club accounts for the coming year, Mr. Castagna says. All previous customers are solicited and certain portions of the bank’s trade area are targeted for direct-mail promotion. About a month later, a second mail ing goes out and, when the current year’s Christm as Club checks are mailed, each recipient receives a third announcement promoting the coming year’s club. Mr. Castagna estimates that the first week’s free payment and the expense of the free premium cost the bank an estimated 3.7% for approximately $3.4 million in Christmas Club deposits last year. National American offers Christ mas Club accounts in six categories: $2, $4, $6, $10, $20, and $40 semi monthly. More than half the bank’s customers choose the three highest categories. “ Christm as Club custom ers are loyal to the concept and to the bank promoting them ,” Mr. Castagna says. Despite the fact that most financial in stitutions in New Orleans and sur rounding areas were vigorously pro tv * , frja -'fc » «*¿3 K j a K . moting NOW accounts during the signup period for the 1981 clubs, National American established a new high in club account signups, he says. “ C hristm as C lub accounts at National American have become a tradition among our customers,” says Mr. Castagna. “Families, neighbors and others simply pass the word along each year and this provides enough momentum to keep the program not only viable, but growing,” he adds. To be on the safe side, however, the bank budgets about $20,000 for media promotion, utilizing radio and televi sion. We pay the first week for you . . . absolutely free!” say the ads. A teller is pictured handing a $10 bill to a customer so the customer can use the bill to make the first week’s payment. The bank also touts the traditional free gift for those signing up for Christ mas Club accounts. During the most recent promotion, the gift was a crystal design petal bowl suitable for holding fruit or serving salads, chips or dips. “Christmas Club accounts are a de pendable source of low-cost funds,” Mr. Castagna says. • • Santa Claus plays a prominent role in the Christmas season festivities at National A m erican Bank, New Orleans. He’s been on hand — albeit behind the scenes — at the hank for a number of years to give kids a shiver of excitement via the U. S. mails. National American operates a San ta’s post office to enable bank cus tomers to arrange for children to re ceive a letter from Santa bearing a postmark from Santa Claus, Ind. Anyone coming to the hank or one of its branches can select one or more letters from several on display, address and stamp matching en velopes and “post” them in a special mail box at the bank. Daily, the let ters are gathered, bundled and sent to Santa Claus, Ind., where they are postmarked and remailed. It’s National American’s way of helping its customers and friends say a special Merry Christmas to chil dren! MID-CONTINENT BANKER for July, 1981 Mr. Bank President, there are few th ‘ left th at are touse,^ work so well. r I• ' ' ¡1§ .• . iisi "■ ' The Ecom ju ter system for banks is one. We call it total bank control. A computer system d e s ecial y f o b mk .b y banker With phisticated reporting capabilities, yet ease of opera« dish. As an Authorized Digital Comp- ;er 1hstributor we can give u :he best o : two worlds: hardware from Digital Equipment Corporation, the leading manufacturer of interactive comp ystems; and application software and services from Ecom ystems, Inc. Contact Dennis J. Davis, Ecom Systems, Inc., 2500 ML Moriah Road, Suite 245, Memphis, TN 38115, (901) 794-5501. ECOM SYSTEMS, INCORPORATED m m uM COMPUTER! MID-CONTINENT BANKER for July, 1981 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 31 Christmas Club Potential Business For Banks Cited by Unidex Survey of people not presently participating in a Christ mas club are interested in starting one. And, one out of four in the 18-34 age group — banking’s future customers — have signified an interest in Christ mas clubs. These are two of the conclusions reached by a 1980 Unidex survey con ducted for Christmas Club a Corp. The survey also verified that although Christmas clubs aren’t the most profit able service for financial institutions, they are propagators of more profitable services. w en ty perc en t T I Christmas Club Brochure Available A “ C hristm as is H ap p in ess” brochure is available from Christmas Club a Corp. that presents details and illustrations of supporting prod ucts available to financial institu tions. Basic components are the coupon book with a member en velope and the Christmas Club check and window envelope, all im printed with Mr. and Mrs. Santa Claus in red, white and green. A cut-out application is available that can be used as a statement en closure, mailing piece or to promote premiums. There also is a shopping and Christmas card list and a book of Christmas carols that can be given to Hostess Set & The average banking customer, ex cluding the Christmas club saver, uses an average of 1.3 bank services. The Christmas club saver presently avails himself of an average of 3.3 bank ser vices. Th ese figures supported and strengthened the results of previous studies conducted in 1976 and 1978. Since 78% of all club savers prefer to make their payments in person, the program rein fo rces cro ss-sellin g opportunities. Thus, the Christmas club saver uses more than one-andone-half more services than his coun- Messages “ 32 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis I customers, schools and churches Financial institutions can promote clubs with a combination of state ment enclosures, soft-sheet posters, application folders, calendar cards, currency holders and tellers’ badges that personnel can wear as remind ers to join the club. Also available is a group of pre miums, such as tree ornaments, hos tess sets, Christmas candles, porce lain mugs, note paper and pads and pens. All advertising products can be scented with pine or holly berry fragrances. Write: Christmas Club a Corp., P. O. Box 20, Easton, PA 18042. Candle Mug J terpart. Each 1,000 Christmas club custom ers is said to represent 924 checking accounts, 894 savings accounts, 419 CDs, 515 installment loans and 649 bank credit card accounts. The survey also shows that the Christmas Club saver is a loyal customer. Eighty per cent have been with the same financial institution for six years or longer as opposed to only 60% of non-club sav ers. At present, 24 million people save $6 billion annually in Christmas clubs. This study indicates a rem aining potential of an additional 46 million people saving $11.5 billion. The study also indicates that a person earning $30,000 a year is just as likely to have a Christmas club as someone earning $10,000. Also, a professional is as likely to participate as a non-professional and all age groups have almost the same incidence of club membership. I t’s been estim ated that approx imately 35% of the total population ex presses interest in Christmas clubs, but that only a fraction of that percen tage actually has been translated into club accounts. Needy Families Helped By Bank Employees Em ployees at Com m erce Union Bank of Rutherford County, Murfrees boro, Tenn., made a special effort to make their new bank building attrac tive last Christmas, since it was the first Christmas the bank had use of the building. It was decided that em ployees would sponsor one needy family by soliciting donations of food, clothing, toys and money from their peers. They also decorated the bank and arranged for a bank employee to portray Santa. The response for items was so great that two families were sponsored and Santa himself delivered the Christmas gifts to the needy children. Ornament Note ‘Pad $V Bank-employee Santa helps child enjoy new wagon as Christmas gift from em ployees of Com m erce Union Bank of Rutherford County, Murfreeboro, Tenn. MID-CONTINENT BANKER for July, 1981 * • - ' % 4 A few hundred miles of Ma Bell’s cable may be great for conducting some business. But incorrespondent banking, weatLiberty National think long distance falls short most of the time. We prefer the face-to-face version of person-to-person. And that means driving instead of dialing. By doing this, our financial banking specialists are better able to under stand you and your bank’s prob lems—whether it concerns data pro cessing, cash management ¡ideas, a big loan to a good customer or any of the other services Liberty offers. Services you might not be ready to handle alone. Proven fact: Specialized financial areasof banking deserve special ized personal attention. For a personal appearance, pick up the phone and give Liberty National’s Correspondent Department a call. 502-566-2022. After that, well start letting our actions do The talking. Liberty National Bank Louisville, Kentucky. We do our corresponding in person M e m b e r F .D .I.C How our correspondent department makes long distance calls. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Ideas That W ork! A potpourri of promotions any bank can use Leftover Premium Items Put to Use As Gifts to Needy at Christmas I F TH O SE stuffed animals, wrist watches, clock radios and luggage left from your bank’s promotions are gathering dust somewhere, give them and some of the Christmas spirit away this year to those who’ll really appreci ate them. That’s what First National, Louis ville, started doing several years ago and what the bank continues to do, only in a much bigger way. Last year, for example, 85 needy Louisvillians, many of them children, as well as resi dents of several retirement homes, be nefited from the bank’s generosity. First National’s Christmas giving began when marketing employees de cided that the flashlights, warming trays, baseball caps and coin banks left from the bank’s promotions could be put to better use than just taking up storage space. So they gathered up the items, wrapped them as gifts, added some food and offered the items to families they had “adopted” for Christmas. Continuing their Christmas tradition last year, employees helped to raise nearly $300 for baskets and Christmas Bank Employees Fete Kids gifts. And the bank made a generous con tribution to the Salvation Army for the purchase of additional Christmas bas kets for the needy. Christmas giving has spread bank wide at First National, not just through fund raising, but also through various departments gathering clothing, toys and other items and giving them to “adoptive” families. Take the collections department as an example. Last Christmas, the 85 employees there collected “to give,” noted Robert Thornton, a credit officer in the department. They gathered and stockpiled food, clothing, money, toys, among other gifts, and distributed them to a man and his two young sons as well as to 20 other families. The man’s two sons also received other gifts, including a shopping spree for clothing, a tour of the bank and a visit with Santa. “We like to help families who are trying hard, but just aren’t making it,” explained Mr. Thornton, who noted that the bank helps people whose Representatives of marketing, estate tax and collections departments at First Nat'l, Louisville, select items remaining from bank premium promotions to be used as Christmas gifts for Louisville's needy. 34 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Each year, employees of Nichols Hills Bank, Oklahoma City, give a Christmas party to residents of nearby Baptist Children's Home. Included are dinners and gifts pre sented by Santa. Employees pick up tab with bank supplying supplemental finan cial support if necessary. Children are in 9-12 age group and are shown here open ing their gifts. needs are verified by Louisville char ities. “These people just haven’t got ten a break yet. ” Several other bank departments, in cluding the estate tax division, also saw that needy families shared in the spirit of Christmas. For the second year, employees of the division pulled together to help five families, according to Pat Proctor, estate tax officer. Recipients included an 8 6 -year-old woman and a couple in their ’70s. “The 8 6 -year-old woman was fun,” she remembered. “She put on the bright red coat that had been given her, and wouldn’t take it off. She just loved it.” Adopting families for Christmas is worth all the effort, Miss Proctor says. “You see the whole spirit of Christ mas, and you see that you do make a difference in people’s lives. That’s a nice feeling.” And for First National, Christmas giving is a way to get useful promotion al items out of storage and into the hands of those who can make the most of them. • • MID-CONTINENT BANKER for July, 1981 Tree of Lights, Decorations, Toys, Music Permeate Mercantile Trust for Holidays HE TRA PPIN G S and spirit of Christmas were in evidence at Mercantile Trust, St. Louis, last holi day season. The bank’s 1,900 em ployees observed the holidays in a number of ways, including dressing up the bank inside and out and filling it with sights and sounds of the season. The most dramatic evidence of the holiday was the Salvation Army “Tree of Lights,” rising 50 feet in front of Mercantile Tower. The tree, which is Employees of Mercantile Trust, St. Louis, members of toy and doll committee, prepare to visit United W ay agencies to deliver items to disadvantaged children. They are (from I.) Charlotte Coker, Bill Akers, Dennis Smith (Santa), Denise Browing and Donna Sens (seated). made of 300 trees mounted on a metal frame, provided a highly visible way of keeping track of corporate and indi vidual contributions for the needy. Lunds donated to illuminate the lights on the tree are used to purchase and distribute food and clothing to families in need, along with toys to about 35,000 children. The Salvation Army also provides dinners for thousands on Christmas. Mercantile Trust President Neal J. Larrell chaired the “Tree of Lights” campaign in 1979, when more than half a million dollars was raised — the largest amount ever up to that time. Inside the bank, carollers donated their lunch hours for several weeks to visiting various bank departments to sing seasonal favorites. In the main lobby, beginning early in December and continuing through Christmas Eve, an organist played Christmas music and requests from customers during the middle part of the day. Many departments made their own C hristm as statem ents with trees, wreaths and decorations; and the main lobby featured a large tree and newly redesigned decorations, as well as dis plays of toys and dolls for disadvan taged children. Dolls were dressed and toys pur chased with money collected from DECORATE YOUR BRANCHES N O W IS T H E T I M E T O W R A P U P YO U R HOLIDAY P R O M O TIO N A L PLANS C U S T O M A N D S T O C K IT E M S AVAILABLE: • SPUN-SATIN, PEARLESCENT GLASS, & ACRYLIC ORNAMENTS • TO/FROM HOLIDAY LABELS & GIFT WRAP • SEASONAL PLUSH DOLLS & ANIMALS • KNIT HATS & SCARVES TH E A B O V E I T E M S A R E A F E W OF OUR M A N Y S E A S O N A L AND Y E A R - R O U N D P R O M O T IO N S . W E R E P R E S E N T THE F A C T O R Y D I R E C T L Y A ND P R O V ID E C O M P L E T E S E R V I C E FO R Y O U R N E E D S . THE PREM IU M GROUP, INC. P.O. BOX 207 9 DARIEN, CT. 0 6 8 2 0 MID-CONTINENT BANKER for July, 1981 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 2 0 3 -8 5 3 -7 7 8 0 2 0 3 -6 5 5 -7 3 6 9 2 0 3 -6 5 5 -3 4 2 1 35 bank employees. The toy and doll com m ittee broke a few records in 1980: It raised almost $1,500 and dres sed almost 800 dolls, the largest num ber in the history of this bank tradition. Committee members chose a num ber of area United Way agencies as recipients of the gifts and visited two of them to present toys and dolls to the children. • • Christmas Sign Restored To Perpetuate Tradition With Assistance of Bank Fort Wayne (Ind.) National played an important part in reinstating a holi day tradition in the downtown area last Christmas. A huge 40-year-old electric sign depicting Santa and eight rein deer was mounted on the exterior wall of the bank and relit for the first time in 22 years. The sign had been constructed in 1940 under sponsorship of a depart ment store and had been a regular holi day attraction for 18 years — minus two years during World War II. When the store moved to a new building, the sign was placed in storage, where it deteriorated for 21 years. It was “discovered” in a warehouse Christmas Kitchen to Observe 25th Year This Christmas kitch en at Bank of the Southwest, Houston, has operated in the bank's lobby for the past 25 years, dis pensing hot ginger bread cookies (50,000 last year!) and hot w assail to p a sse rsb y . Ruby Goodson, a bank re tiree, has served as kitchen hostess since its inception. Fur nishings are authen tic to the turn of the century. in 1979 and was gradually restored by volunteers. A single reindeer was m ounted and illu m in ated on the bank’s wall on Thanksgiving, 1979, and a second d eer was added b efore Christmas. But it wasn’t until the 1980 holiday season that the entire sign was ready to be displayed. At the time it was constructed, the sign was reported to be the second largest lighted display in the nation. Large it still is — it’s 155 feet long, weighs 5 V2 tons and contains almost 25,000 light bulbs! Bank officials are modest about tak ing much credit for the restoration. However, they do admit that the bank was “more than a little involved in forming, maintaining and coordinating the unique alliance that made it all happen.’’ Dress-Doll Winners Honored by Bank Ju d g e s selected th ese 10 d o lls as 1 9 80 w in n e rs in annual dress-a-doll com petition spon sored by Farmers & M erch an ts B a n k, C en tre, A la . Bank orders four dozen dolls each year and local women create outfits for them. Two dozen toy log truck kits also are ordered and given to local Boy Scouts for a sse m b lin g . Dolls and trucks are dis tributed in time for Christmas. 36 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Employees Spread Goodwill During Christmas Season At Bank of Oklahoma, Tulsa It s often been said that employees make the difference, and there’s no better time to test the validity of that statement than during the Christmas season! At Bank of Oklahoma, Tulsa, em ployees participate actively in several projects that fill the bank with the Christmas spirit. They band together to form a choir to sing Christmas music for customers in the lobby. Under the direction of a minister of music from a local church, 30 employees learn 15 carols, 10 of which are sung at each daily concert the week before the holiday. Other employees make garments for 100 dolls the bank orders, a tradition carried out at the bank for the past 25 years. The outfits are judged and the dolls are distributed by the Salvation Army. The bank also conducts a canned food drive and employees are urged to contribute at least one item of canned goods during a week-long drive. If each employee contributes just one item, the bank can give almost 40 cases of food to the needy. Thirty employees of Bank of Oklahoma, Tulsa, rehearse Christmas carols in bank lobby under direction of minister of music at local church. Choir performs daily during week before Christmas. petition >ur mer Its . . . ■ . • • Has Never Been Tougher. McPherson BariRTC 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. W ith C aw thon you deal d ire ct. W e handle p lanning, sa le s, m anufacturing , in sta lla tio n and se rv ic e on a turnkey b asis. C re a tiv e designs to id e n tify your b ank, at no e xtra co st. Your co m p lete sa tisfa ctio n is g uaranteed by our co m p reh en sive w arra n ty. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis C all or w rite to d a y for im portant in fo rm atio n . A s k for Bob Crum pton. [ÛuCAWTHOn L J BUILDING SYSTEM S, INC. 505 Interstate 35 E DeSoto, Texas 75115 (214)223-4900 FROM FIRST TO THE Selling travelers cheques is good business. But if handling travelers cheques results in administrative hassles, harried em ployees and disgruntled customers, then it’s bad business. That’s w h y you should carry BankAmerica Travelers Cheques. We’ve spent over fifty years perfecting our sellers’ program so that today it’s a model of convenience, efficiency and personal service. W E’RE G O IN G A LO N G WAY TO A M INIM IZE Y O U R PAPERW O RK. W hen you handle BankAmerica Travelers Cheques, w e handle time-consuming chores like record keeping and data process ing. We also keep careful watch over your inventory so your supplies can be autom atically replenished before they get too low. In addition, w e have flexible remittance methods so there may be no need to change your remittance scheduling to fit ours. And finally, should you be audited and require reconcilem ent or other informa tion, you can expect a tim ely response. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis W E’RE G O IN G A LO N G WAY T O G IV E Y O U PERSO N A L S E R V IC E. O u r 24-hour toll-free number provides direct access to our L | e | m account and sales representa? tives. So if any problems or questions arise, you don’t have to w ait for the next day. O r the next w eek. You get action w hen you need it. Now. W E’RE G O IN G A LO N G WAY T O BU ILD Y O U R B U SIN ESS. 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You’ll be surprised just how guickly and easily you can becom e a BankAmerica Travelers Cheque seller. Just call Frank Hyzdu,V.R Domestic Sales, toll-free at 800-227-3333 (in California, Alaska and H aw aii, call collect 415-622-4721). He’ll tell you everything you need to know about our first-class service. Right down to the last detail. BA CHEQUE CORPORATION a B an k Am erica TRAVELERS CHEQUES W ere g o in g a long w a y for you. : B a n k A m e r ic a co m pan y All the Country’s ‘ Top Designers are right herein the Mid-South • Steelcase, K noil International, Herm an M iller . . . all the best are as close as your telephone and A rrow Business Services, just down the road in M em phis. You don't have to go to New York, C hicago or the W est C oast to give your bank the benefit of the m ost m odem and space-efficient concepts in office design. W e have them all, expertly displayed and in inventory in our huge M em phis show room and w arehouse. A s a bonus, the professional design consultants on our staff specialize in b an k facilities. O ur totally self-contained m odular units can help you maxim ize space utilization and flexibility while achieving a bright, open atm osphere in your entire bank. Unlike adding or m oving w alls, the cost of m odular units can give you additional advantages such as investm ent tax credits for capital equipm ent, and provide you w ith office space that changes easily when your needs do. W e’ll be happy to send you inform ation on iiW jf n n / ^ l A m odular systems or visit with you personally. / lK i\ \ / r r i So give us a call or visit our show room . BUSNESo ctRVICES, INC. Let us show vou w hat A rrow Business Services Memphis Bank & Trust - c , . , r . 3050 Millbranch, Memphis,Tennessee 38116 can do tor you and your bank, no further 901/345-9861 away than here in M em phis. 40 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis MID-CONTINENT BANKER for July, 1981 no iDLiU A g i f t o f $ 2 5 , 0 0 0 to the Salvation Army’s annual “Tree of Lights” program was made last Decem ber by Hampton Metro Bank of St. Louis. The more than half a million dollars collected in the Salvation Army program each year is used to support a variety of Christmas programs for families unable to afford them. The bank donated 250 to the project for each visitor who entered its 25th anniversary drawing or its new facility’s grand opening drawing over a three-day period. “We wanted to do something to recognize the con tribution our customers have had in our growth,” said James R. James Jr., chairman/CEO, Metro Bancholding Corp. “That’s why we decided to make a donation to the Tree of Lights in the name of each of the entrants. ” The Tree of Lights has been a local tradition at Christ mas for more than 30 years. It takes a $1,000 contribution from a corporation to light a single blinking bulb on the 50-foot high tree that is assembled on a downtown street corner each December. A " 1 2 D a y s o f C h r i s t m a s " p r o g r a m was sponsored last year by State Bank, Rensselaer, Ind., that featured a local organization displaying and demonstrating a craft, hobby or talent in the bank’s lobby on each of 12 days early in December. Each participating organization re ceived a $25 donation to its treasury from the bank. The first day featured the local art league and four artists showed and demonstrated paintings in oil, acrylic and watercolors. On following days residents displayed tatting, knitting, crocheting, quilting, stained-glass mak ing, sketching, fly tieing, candy making, spinning, cornhusk doll making, ceramics and cake decorating. Cake and coffee were served during the cake decorating dem onstration. Each demonstration took place between the hours of 10 a.m. and 2 p.m. Santa Claus visited on two Saturday mornings and photos were taken of children in Santa’s lap and were given to parents. A decided increase in lobby traffic was noticed during the program and stained-glass making and cake decorating drew the largest crowds. D e r b y ( C o n n .) S a v i n g s B a n k went all out to pro mote a lead crystal vase that was offered to customers signing up for new Christmas Club accounts. A special newspaper ad was prepared titled “The 12 Ways of Christmas.” A series of 12 photos showed how the vase could be used in a dozen ways, ranging from holding yarn and knitting needles to a receptible for kitchen utensils to an attractive gift for someone at Christmas. The bank features a “perpetual passbook in connec tion with its Christmas Club accounts. Once a customer opens an account, it’s perpetual. The same passbook is used year after year and there’s no need to reopen the account each year. MID-CONTINENT BANKER for July, 1981 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis H u n d r e d s o f s t u d e n t s a n d m u s ic ia n s were in volved in last year’s Christmas Festival of Music at Amer ican Bank, Baton Rouge. Two programs a day for three weeks were held in the bank’s plaza at noon and 5:30 p. m. Participants were from local schools and churches. Eight angels made of heavy wire outlined with tiny white lights were suspended about 35 feet above the plaza to decorate the setting, giving the appearance at night of a heavenly host hovering over the performance area. Stereo Christmas music was broadcast in the plaza each day from 6 p.m. to 10 p.m. Halfway through the observance, a special evening program was presented that featured a string band, an adult choir singing excerpts from Handel’s “Messiah” and a hand-bell ensemble. Types of music performed on other days ranged from barbershop singing to selections by a tuba quartet. E m p l o y e e s o f M e r c h a n t s & P l a n t e r s B a n k , Cam den, Ark., always get the Christmas season off to a good start by decorating a float for the annual downtown Christmas parade. Employees also decorate trees in the bank’s downtown lobby with handmade ornaments and they serve refreshments to customers during Christmas week. Santa visits each of the bank’s four branches each year and children visiting him can register for a bicycle that’s given away at each branch. Customers are given gifts, too, including ice scrapers, ballpoint pens, Christmas package name tags, children’s tops, suckers, candy canes and calendars. F lo c k e d t r e e s , w r e a t h s , candles, teddy bears and stockings made up the decor on each floor at Fourth National, Tulsa, last holiday season. On the bank’s public floors customers were offered gingerbread men and hot wassail while a local organist provided Christmas music. C u s t o m e r s o f B r e n t w o o d B a n k , St. Louis, know when Christmas is near when they see an old fashioned popcorn wagon in the bank’s lobby! Each year the replica of an antique popcorn wagon, circa 1890, is rolled into the lobby and bank employees pop and serve hot popcorn to customers. The brightly trimmed and polished wagon has a candystriped canopy, yellow spoked wheels and brass orna ments. It includes a peanut roaster and special attach ments for steam power. About two bushels of corn are popped on the premises each season. A b o u t 1 0 0 u n d e r p r i v i l e g e d c h i l d r e n make Christ mas ornaments each year and use them to decorate a tree in the lobby of Southern National, Houston, during the bank’s annual Christmas party for children. After the tree is trimmed, the children are treated to luncheon and are given gingerbread men to take home. Then they visit with Santa, who gives each child a gift. 41 How to Use at Christmas EO PLE may seem cold and hardBy Orville Goerger boiled 364 days out of the year. Contributing Editor But on Christmas everyone becomes a This article is based on material contained softie. Your bank may seem the same way in “How to Give Yourself Profit-Building to some people — most of the year. A Ideas fo r Bank Christmas Promotions published by Commerce Publishing Co., building where mysterious things hap parent firm o f M i d - C o n t i n e n t B a n k e r . pen to their money. A cold-blooded computer. Even your banker-like re small bank has the same opportunity as serve may seem a bit frightening. That’s why Christmas — with its a big bank to come up with a great one. These points are not unknown or great opportunities for building “peo ple relations” — is so important to overlooked by most bankers. In fact, banks. Even the biggest institutions in the great majority make at least some that season can step out of bankish effort to warm the Christmas spirit in character and prove that underneath it their institutions. Because there are so many things that can be done in this all are a lot of nice people. How is this done? By simply doing area — and because so many banks are the kind of things people do at the making such efforts — a variety of holiday season — in short, to act a bit ideas can be found in this field. • Christmas Poetry Contest for like the softies most of us become at Children. First Alabama Bank, Mont that time. By being extra nice to those we meet gomery, has enjoyed great success with and do business with. By making life a a C hristm as poetry co n test for bit more pleasant for people. By doing elementary school children. Public things for them. By giving them some school children, third to sixth grades, thing— a gift, a favor, extra enjoyment were invited to write original Christ — without asking a commercial favor mas verse, with prizes for first-, in return. In short, by living the true second- and third-place winners in each grade. spirit of the season. Hundreds of poems were submitted Besults in this area can’t be mea and awards were presented at the pub sured in dollars and cents or new accounts. The PR dividends are in lic library and last school day before tangible, but they are there. It is a the holidays. Volumes of children’s great balancer for any bad impressions stories and verse were given as prizes. that may have been made during the year. It strengthens even more all the good qualities people are aware of when they bank with you. You’ll even find “people-relations” opportunities inside your bank. Your staff is made up of people. They be come softies, too. And, when their working environment reflects the spir it of Christmas, their ties with the rest of the banking family become even stronger. On the budget side, you’ll find most “people-relations” ideas cost little. Nor do they, in most part, require a lot of space or personnel. The most impor tant requisite is an idea — and the P 42 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis The public library director and a col lege English instru ctor served as judges. P ublic-relations dividends were numerous. During D ecem ber, the public library scheduled an exhibit of “Christmas Poems by Montgomery Children.” The daily newspaper, the two weeks before Christmas, ran a dai ly column featuring all the prize win ners and some of the runners-up. Newspaper photographers gave great coverage of the w inners and the awards presentation. • Cookies and Coffee, Anyone? One of the simplest and perhaps most widely appreciated Christmas ges tures by a bank is serving free coffee and cookies in the lobby. With shop pers busy bustling around, a coffee break at the bank warms both the stomach and the heart. If space permits, set up the coffee bar near the Christmas club display or whatever other bank feature you want noticed. To enhance the holiday spirit, have an attractive girl in a Santa hat or costume serving the coffee. • Sponsor a TV or Radio Special Program. Each season, radio and TV media assemble a number of Christ mas specials. Some are syndicated packages featuring various holidaytype entertainment; others are special ly produced by a station and primarily use local talent. A number of banks, for goodwill purposes, act as sponsors of these programs. Some radio stations, especially the all-music type, offer a 30-hour all-Christmas-music program, with one sponsor having exclusive rights to the broadcast. These pro grams start at 6 o’clock Christmas Eve and run until midnight Christmas Day. Incidentally, during these hours, com m ercials should be lim ited to goodwill messages in keeping with the spirit of the day. • Santa Loves a Parade. Some com munities, to open the Christmas sea son, stage a parade of floats by business MID-CONTINENT BANKER for July, 1981 Am M ot 6*88 ASm el 4H88 Am Str f'/»90 A Su« 5.3*93 A T T 3%*64 A T T 4%*85 A T T 2%*S6 A T T 3%s90 A T T 8%0O A T T 7*0» A T T 7%*03 A T T l.aOsOS A T T 7%s82 A T T 8H*07 A T T 10%90 A T T 13%81 A m fa c 5%94 Am px S%94 Anhr M M A ppP 11*82 12. AppP KJ’ j M A rco t a n cv 7.8 12. 9.1 4’ 60V, 59V, 84 58 T? 5 60% 3 »9% 4 14 10 58 60% + % 59% - % 14 5« . y* x 1 Bond* E x x R 8%01 E a r t h 5*94 13. 60 61% c v 18 51% 60 49% " Bond* Cur N a ll SupOil 9%99 13. 1 Y W V o i H igh Lo w C lo io Chg Tan d y 10*91 14. 20 Teled y 7*99 14. I 6 1% + 1 % I1 MntWC 7%88 63% 63% 63% + % . TcledV 10S04A IS. 23 49% - % 1! 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Deposit Guaranty’s Corporate Finance Department was established to assist business and industry in the Southeast with their long-term corporate financing needs. Deposit Guaranty is the only bank in Mississippi active in the origination and placement of various industrial development bonds. Some of these bonds can carry an attractive tax-exemption feature, or taxexempt bonds can be issued in conjunction with taxable revenue bonds. If a company needs an injection of long-term capital, a taxable private placement is an alternative available through our Corporate Finance Department. This specialized experience and expertise is part of Deposit Guaranty’s new world of Corporate Banking Services . . . available to you and your customers. For prompt action, contact our Financial Institutions Department, Main Office, One Deposit Guaranty Plaza, Jackson, Mississippi, 39205. Or c a l l . .. Mississippi WATS 1-800-222-7640. Regional WATS 1-800-647-8350. Financial Institutions Department DEPOSIT GUARANTY NATIONAL BANK Member F.D.I.C. Grow with Us MID-CONTINENT BANKER for July, 1981 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 43 houses and organizations. If the oppor tunity presents itself, a bank float makes a colorful addition to whatever holiday promotion is being planned. If possible, involve the bank staff in the design and construction of the float. Perhaps offer a prize in a design competition. If the float will carry peo ple, use representatives from all de partments — and include the CEO or president. To add longer life to this promotion, take photographs of all the floats in the parade and display them in your lobby as part of your Christmas decorations. • Santa Loves Christmas Music. So do customers and visitors to your bank. One of the simplest ways to create in terest and build goodwill is with organ concerts in the bank lobby. About three or four weeks before Christmas — whenever your Christmas club campaign opens. If possible, hire a well-known local organist. He has a built-in following, and his friends and fans will drop by to visit him. Tell him what kind of music you wish — 100% Christmas, popular favorites of the day or a mix of both. One caution: If his concerts will in clude show music or other copyrighted material, get clearance in advance from your local representative of the American Society of Composers and Publishers (ASCAP). Also check the volume of the music; keep it loud enough to be heard as background, but not so loud it interferes with normal business operations. • Don’t Forget the Carol Singers. People never grow tired of hearing the beloved old Christmas carols. So put a little glow in their hearts by arranging concerts by carolers throughout the pre-Christmas season. One of the best ways is to organize a choral group among em ployees and give them appropriate recognition when they perform in the bank. It’s another way of subtly publicizing the “we re peo ple, too,” image of your bank; it also provides an excellent employee activ ity and makes a contribution to the bank’s internal public relations. Outside choral groups also can be used. Almost every school, church and organization has a chorus eager to per form. Invite them to provide a lunchhour program in your lobby. If there are enough groups available, you can schedule a different chorus each day to attract a number of audiences. If desired, some banks combine these carol concerts with an opportu nity for listeners to make voluntary donations to some designated local charity. In the same vein, your bank choral group, if practical, can go “on 44 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis tour” — singing carols at hospitals, re tirement homes and the like. If your bank uses Christmas organ music and/or carolers, remember to drop a word to that effect in your radio, TV and print advertising; you won’t get maximum credit for your good deeds if you hide your light under that prover bial bushel. • Toast Customers at a “M erry Dairy” Drink Bar. Everyone likes eggnog at Christmas. When Mercan tile Trust, St. Louis, set up a dairy bar Christmas Customs Displayed At Bank by Ethnic Clubs Nine different county ethnic orga nizations participated in Terre Haute (Ind.) First National’s annual Christ mas around the world exhibits last year. Beginning early in the year, the bank contacted various clubs and orga nizations to invite them to participate in the exhibits, which are presented during the month of December. Last year, the second time the exhibits were presented, each of the bank’s nine locations was decorated to repre sent the yuletide traditions of coun tries such as Sweden, Mexico, Ger many and Russia. Highlight of the exhibits is the Fri day before Christmas, when partici pating organizations serve refresh ments native to their country. Last year, foods included Swedish gingersnaps and lucia buns, Russian kiffles, baklava and koulich cake, Mexican wedding cakes and German simtsterne (cinnamon stars), spritzgebak (pastry) and speclazius (almond cookies). Cash prizes are awarded for the best exhibits and judging is done by a panel of community leaders who look for creativity, originality and accurate de piction of each nationality’s yule cus toms. Exhibit depicting Christmas customs of Ita ly w as displayed at branch of Terre Haute (Ind.) First National during holiday season, courtesy Francis Vigo Italian Am erican Club. Exhibit tied for fourth place prize given by bank. in its lobby — with (nonalcoholic) eggnog provided by the St. Louis Dis trict Dairy Council — over 2,000 came by for a free drink. Over 50 gallons of eggnog were consumed, and each visi tor received a leaflet containing holi day recipes. This public-relations activity cost the bank virtually noth ing, made 2 ,0 0 0 customers a bit hap pier — and delighted the Dairy Coun cil. • Cut Charities Into Christmas Savings. Christmas is a timely moment to donate money to charity. H ere’s how a bank can make a charitable donation serve as a stimulus to savingsaccount deposits. For the month before Christmas, announce that the bank will donate an amount equal to 1 % of new savings deposits, from $500 to $99,999, to the charity of the saver’s choice. Thus, the customer can increase his personal savings while giving others a helping hand. All recognized tax-exempt U. S. organizations, except political groups, are eligible to receive these donations. All new deposit money, as well as addi tions to existing accounts, qualify. (Though given in the customer’s name, they are not allowable as individual tax-deductible donations.) • Give the Kids a Christmas Party. Santa and bankers seldom forget the kids at Christmas — and they remem ber them in a number of ways. Some banks buy out a nearby thea ter and invite all the neighborhood kids to be their guests at the movies. Tickets are distributed through local schools. In addition to admission, each child receives a gift piggy bank or other appropriate gift. Frost National, San Antonio, Tex., throws a party in the bank’s restaurant for children from various welfaresupported homes. Refreshments are served; children and bankers partici pate in a sing-along of carols, and Santa pays a visit with a toy for each child. Toys for tots are gathered in many ways. One bank (with a sizable lobby) set up a small Santa’s workshop on the premises. Craftsmen, taking the part of Santa’s elves, were provided mate rials and tools to build toys during banking hours. This provides an in teresting “living” lobby display and attracts much attention. At Christmas, the toys that have been made are dis tributed to needy children. • Lend a Holiday Hand to Local Churches. Most churches arrange spe cial Christmas programs ranging from carol singing to tableaus, pageants and special holiday displays. All would like (C ontinued on page 55) MID-CONTINENT BANKER for July, 1981 “I carry enough parts on every service call to handle almost any service problem. Hosier thinks ahead!’ Every M osler service vehicle is a m ini-warehouse on w heels. Kenneth Mayberry Sr. Service Technician Saginaw, Michigan O n a s e rv ic e c a ll, o u r te c h n ic ia n s d o n ’t h a v e to w a s te va l u a b le tim e m a k in g e x tra trip s to o n e o f o u r m a jo r d is trib u tio n w a re h o u s e s fo r p a rts — m o s t o f th e tim e all it ta k e s is a trip to th e v a n o r tru c k . E a c h o f o u r o v e r 1 ,0 0 0 c u s to m v e h ic le s is e q u ip p e d w ith th o u s a n d s o f d o lla rs w o rth o f re p la c e m e n t p a rts a n d to o ls . A v a ila b le rig h t th e n . In a d d itio n , o u r m o re th a n a th o u s a n d e x p e rt te c h n i c ia n s a re fa c to ry tra in e d in e v e ry a s p e c t o f s e rv ic e , in c lu d in g in s ta lla tio n a n d p re v e n ta tiv e m a in te n a n c e o n all m a k e s o f s e c u rity p ro d u c ts . In fa c t a b o u t 2 0 % o f a M o s le r jj s e rv ic e te c h n ic ia n ’s c a re e r is s p e n t in tra in in g , s ta y in g c u rre n t w ith th e n e w e s t in n o v a tio n s a n d te c h n iq u e s . W e w a n t o u r s e rv ic e to b e a s g o o d as a n y o f o u r $ p ro d u c ts . F ro m s ta rt to fin is h . B e c a u s e tw e n ty -fo u r -M h o u rs a day, s e v e n d a y s a w e e k , th e in te g rity o f o u r s e rv ic e is a s im p o rta n t to M o s le r a s it is to yo u . T h a t’s -¿ p w h y w e th in k a h e a d . S o y o u c a n s ta y a h e a d . Mosler An A m e r ic a n - S t a n d a r d Company Hamilton, Ohio 45012 W h e re q u a lity s e rv ic e is th e p ro d u c t o f q u a lity p e o p le . MID-CONTINENT BANKER for July, 1981 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 45 Ethics for the Loan O fficer How to Avoid 'Make-lf Loans, Extending Credit To Relatives, Friends, Affiliated Companies O f Bank Officers and Directors NE O F TH E most critical areas dealing with unethical and ille gal practices in banks is insider trans actions. There probably is no greater cause of bank failures than wrongful use of banking privileges by insiders. One problem we frequently run into is pressure to use insurance, legal, appraisal and other services owned or operated by directors and senior offic ers. Another problem is “make-it” loans — when top management takes a loan to a loan officer and says, “Make it.” The loan officer is faced with a predica ment if the loan does not appear to have merit. He can refuse to make the loan and risk top management’s ire or he can make the loan, realizing it isn’t a bankable credit. This situation also in cludes granting large overdrafts and uncollected-funds usage to friends or associates of directors and/or top man agement. Loans to affiliated companies of bank officers and directors have caused severe problems. Here again, undue influence sometimes is applied to force the loan officer to make loans to com panies owned or controlled by direc tors and top management. By Gilbert E. Coleman President Security Bank & Trust Co. Mt. Vernon, III. T h e re ’s another area of insider transactions where the loan may be small, but nevertheless problematic. This is when the loan officer extends credit to relatives and friends. It can be a disadvantage to a banker when he’s a loan officer in his hometown. A loan officer may have a tendency to grant preferential terms, conditions or in terest rates to people he knows and/or loves. This is called the “hometown syndrome.” I’m sure many loan offic ers handle this problem capably. It can be lessened or avoided by asking another loan officer to deal with these relatives and friends, many of whom are known only as bank customers to other bankers. Performing duties and responsibili ties on bank time and premises for director-affiliated companies has been another problem for bank examiners and the bank itself. Shareholders are entitled to receive any stock or cash Gilbert E. Coleman gave the talk on which this article is based at the Illinois Bankers Association's commercial credit conference. He entered banking in 1958 at Washington (Ind.) Nat'l and, before taking his present post in 1975, was an officer of one Missouri bank and two Illinois banks and a bank HC. Mr. Coleman served the IBA as pres., Group 10, 1980-81, and v. ch., commercial credit commitee, 1979-81. 46 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis dividends issued and to vote their shares at any shareholders’ meeting, but the bank’s responsibility to direc tors and/or stockholders should end there. Keeping bank expenses in line is difficult enough without providing undue and expensive services to insid ers’ affiliated companies. Some bank directors approve loans on street corners. All of us hope direc tors will generate loan and deposit business; however, application for and approval of a loan should be done in side the bank by loan officers. When a customer sits down at a loan officer’s desk and says, “Director so and so said I could get a loan here, ” the loan officer should ask, “Did director so and so indicate he would guarantee the pa per?” When directors are approached out side the bank, they should encourage the potential borrower to go to the bank with the necessary supporting papers and should assure him that he will receive fair treatment — not that he will be granted the loan based on a street-corner conversation. Employees should be encouraged to go to loan officers when they have legitim ate borrow ing n eeds. We should remember, however, that loans to employees are not a fringe benefit. Employee loans should be as good as or better than other loans. It’s difficult for a loan officer to evaluate an applica tion objectively when he has worked with an employee for 10 years and en joys a friendly relationship. If the em ployee can get better terms or condi tions at another bank, he should be encouraged to do the best he can for himself. Interest rates and terms for employees should be the same as for any other customer in similar financial circumstances. One reason loans to em ployees should not be a fringe benefit: It’s like ly that only 30% to 50% of a bank’s employees may be loan customers. Giving preferential interest rates pro vides them with a benefit not available MID-CONTINENT BANKER for July, 1981 C h a r le y F o re t & C a rro ll G riffith le n d in g a h e lp in g h an d at th e L o u is ia n a C a tfis h F e s t iv a l in D e s A lle m a n d s (s e e n h e re s e r v in g o n t h e S e a f o o d P r o c e s s i n g C o m m it t e e ). W h e th e r fis h in g o r h e lp in g yo u w ith y o u r b a n k in g n e e d s — t h e y w ill n e v e r sca le down th e ir e ffo rts . G e t th e m on the line at (5 0 4 ) 5 2 5 - 7 7 6 1 . The Louisiana Catfish Festival had its origin in 1975 and is celebrated annually in M id-July in Des Allemands, La.— Catfish Capital of the World. Special Events: Beauty Queen Pageant and Coronation Ball; World Cham pionship Catfish Skinning Contest; Art Exhibit; Duck Carving; Rides. Served: C atfish—Couvillion, Fried, Sauce Piquante, Sandwiches, Gumbo. N A T IO N A L A M E R IC A N B A N K ...Äzr.i A M E R IC A N BANK S A LU TE S I'O U IS IA S A CATFISH i ? k,t ;byys 1 festival AMERICAN BANK OF N E W O R L E A N S A salute to Festivities in L ouisiana (O n e in a series by the N ational A m e ric a n B ank) C O R R E S P O N D E N T B A N K IN G D IV IS IO N 200 Carondelet Street • New O rleans. La. 70130 • 504/525-7761 MID-CONTINENT BANKER for July, 1981 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 47 to non-borrowers. Many banks handle this situation by directing only one loan officer to extend these credits. Another ethics consideration deals with banker-customer relations. One example involves loan-fee kickbacks. Unfortunately, there are situations in which a loan officer receives a fee for getting a loan through the loan com mittee or for making the loan himself. It not only is unethical, but illegal for a bank lending officer to accept fees for making any loan other than those au thorized by the directors. Another problem is noncash gifts from customers. Some borrowers will use this method to encourage a loan officer to make loans he ordinarily should not make. Examiners and top bank-m anagem ent people have no objection to a free dinner or a small gift when the value does not exceed $ 10 $15, assuming the officer would not be compromised by a small gift. The problem arises when the gift is of sub stantial value. An auto dealer gave gift certificates to installment loan officers, supposed ly as a goodwill gesture. The certifi cates were for $150 suits of clothes. In that instance, management required the certificates be returned to the deal er. It is a good practice for top manage ment to require that a list of all gifts and their values be submitted annual ly. This situation surfaces most often during the Christmas season. Purchasing goods and services from bank customers at favored prices is another area of contention. When we purchase an automobile or some other major item, we would hope to get the best price possible. However, if the auto dealer or other retailer offers lending officers a deal well below any rational sale price, loan officers’ posi tions are compromised. It’s almost cer tain the retailer will demand a return favor, and it may be something the bank cannot live with. Sometimes, bank officers are placed on customer companies’ boards be cause of the oversight needed by the bank. Problems in this area arise when loan officers are asked to becom e members of boards of small, closely held firms. A bank officer certainly should get his own bank board ’s approval before joining a company’s board. Also, any cred it relations should be transferred to another loan officer. Several years ago, an officer was offered shares of stock in a computer company that was serving his bank. One can see the possible conflict of interest if the bank decided, or was 48 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis trying to decide, whether to change processors. The officer owning the computer stock would hold a conflictof-interest position in making this de termination. Other areas of bank-customer rela tions need scrutiny. These include honoring overdrafts, holding cash items and allowing companies to draw against uncollected funds. The loan officer should not have complete con trol over any company’s or customer’s account balances if he is dealing with that person or firm on the loan side. He may have some input on whether these special privileges should be granted, but he should not have the final say over granting these privileges. Sometimes, when a bank goes to one of its correspondents to get help on an overline loan, the latter will ask for additional balances before it grants an extension of credit to the respondent’s customer. This practice is dangerous and illegal. A bank would be foolish to enter into such an arrangement. Making political donations and ac quiring public funds sometimes create a situation that results in unethical or illegal behavior in banks. Under the Federal Election Law, there’s a $ 1 ,0 0 0 limitation for any indi vidual giving to a national candidate. In addition, the nam e, address, amount given and contributor’s profes sion must be listed. T h ese electio n laws are bein g violated. The most common violation is when officers make donations in their names and then recover their donations by putting expense items through their banks’ books, listing some other use. There also are in- RMA Directory Available RMA’s 1981 “Directory of Credit Information Personnel now is avail able. It contains the names, phone numbers and mailing addresses of more than 5,000 bankers involved in the exchange of credit information on commercial customers — foreign and domestic. The directory also contains other information for people involved in credit information exchange, includ ing the seven basic “guidelines for making an inquiry,” samples of let ters used by bank credit profession als to request information and reply to inquiries and a glossary of 60 basic terms the professional credit investi gator should know. Copies are available at single and quantity rates from the RMA Order Department, 1616 Philadelphia National Bank Building, Phil adelphia, PA 19107. stances where a bank will increase salaries of officers or directors, with the requirement that the extra funds be used for political donations. This is illegal. Some instances have been reported where certain fee collections within a bank are div erted to a checking account and these funds, in turn, given as political donations. A few cases have emerged where credit-life-insurance commissions were used to make polit ical donations through dummy cor porations. One bank had an arrangement with the local radio station and newspaper — one was Republican and the other Democrat. These media would bill the bank on fictitious invoices and the funds were funneled to the two par ties. It would be just as simple to han dle political donations correctly and aboveboard. It certainly would take the heat off the C E O . Donations would be made by requesting political contributions from directors and offic ers for various candidates the CEO may want to support. Many banks rely heavily on deposits of public funds, both checking accounts and time deposits. Some banks are quite heavy in public funds while others have little. The size of public-fund deposits may indicate how good a politician you are o r what favors you are willing to grant to office holders. There have been instances where low-interest loans or even loans without interest charges were made to officeholders. Sometimes, higher in terest rates were paid for CDs from public depositories to get checking accounts. In the Chicago metropolitan area, a county treasurer was offering publicfund deposits to any bank in neighbor ing counties that would make him a personal loan. This definitely is a con flict of interest, and the county treasur er was indicted. Bankers should have the right and privilege to be active in politics. If they desire, they should be allowed to serve on political committees, and many are serving as treasurers. Bankers in volved in these activities need to be extremely careful in serving in these capacities. T h eir actions must be beyond reproach. There has been considerable public ity in the last few years concerning bank officers receiving credit-life com missions and operating insurance com panies inside their banks. All income from insurance activities should go through the bank’s books. If the direc tors choose to give a bonus for selling credit life, that’s fine, providing it is MID-CONTINENT BANKER for July, 1981 J Harris Trust & Savings Bank o f Chicago was looking fo r a fresh promotion. Requisites: No complicated “mix-or-match” inventories; no breakage in transit or breakdown in use. In short, no hassles. Enter Hubert—a customdesigned toy by Animal Fair, who, in a series o f successful promotions, has attracted a “lion’s share” o f new customers and savings deposits to the bank. Simple and effective. That’s what Animal Fair soft toy programs are ©Animal Fair, Inc., 1980 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis all about. Ask Harris. Ask Atlanta’s Citizens and Southern National Bank, Northwest Bancorporation (Banco), and more! We have a proven track record for designing, manufacturing and delivering on time, top quality, lasting “ originals” to fit specific budget and creative requirements. For an exclusive change-of-pace promotion with year ’round appeal and no hassles, shouldn’t you be “ re-lion” on Animal Fair? animal faim Plan your Soft Toy Promotion Now! Call (612) 831-7200 Or write: Harold McClendon Animal Fair, Inc. P.O. Box 1326 Minneapolis, MN55440 PRIORITY — READING FOR YOUR DIRECTORS -before "problem” shareholders throw your Annual Meeting into turmoil A timely management tool! EFFECTIVE SHAREHOLDER MEETINGS Pitfalls in today’s Annual Meetings and how to avoid them. Tested procedures for an ticipating and handling problems. Shows, step by step, how to plan, prepare and stage Annual Meetings that protect your bank image and enthuse shareholders. 00 $12 per copy 100 pages QUANTITY PRICES needs. The c h e c k lis t. Edited by Dr. Lewis E. Davids Editor, The BANK BOARD Letter a tte n d a n c e . B e fo re th e m . your next s h a re h o ld e r m e e tin g , g e t re a d y flie s , a c tiv is ts now and m a y b e p la n n in g p o s a ls fo r g a d o th e rs who to d is ru p t y o u r p ro gram . and and bases M a t e r ia ls to fo r p ro o m ittin g m a il. A g e n d a p r o c e d u r a l ru le s . “ P r o b le m ” s to c k h o ld e rs . s o lic itin g P itfa lls m a te ria l. when P ro xy s ta te H e r e ’s h o w t o a n t i c i p a t e d a m a g in g . s u p p lie d in c id e n ts , p rep a re te s te d Annual rep o rt tu rn p o te n tia l tru s te e s , e tc . d is a s te rs p lu s fo r A in to a your bank. te s te d $10.00 $ 9.00 $ 8.50 $ 8.25 QUANTITY PRICES SEND COUPON BELOW. ORDER YOUR COPY TODAY - AND DON’T FORGET YOUR DIRECTORS’ COPIES! in fo rm a tio n re p o rts , m a te ria l b an kers, to ” of Annual in c e p tio n to fin a l in c lu d in g re s p o n s ib le s h a re h o ld e rs ’ p a g e s o f “ m u s t ” re a d in g fo r b a n k q u e s tio n s . d e a lin g w ith In in fla m a to ry d is ru p tio n s , k e e p in g y o u r “ c o o l” fo r each p erso nn el te lls h o w to h a n d le c o n tro v e rs ia l s te p . 96 c h a i r m e n , b o a r d m e m b e r s a n d a ll A complete schedule for the preparation of an annual meeting . . . from its inception to “ report ing the results.’ ’ Each item on this checklist designates a person responsible for its completion. o f f ic e r s in v o lv e d . w h i l e h a n d l i n g t h e m , p r e p a r i n g in a d v a n c e to m in im iz e th e m . D e ta ils in c lu d e h a n d lin g of THE BANK BOARD LETTER 408 Olive St. Louis, Mo. 63102 u n u s u a l a c tio n s (s u c h a s r e p la c in g a C E O ) — tio n s — d ire c to rs — s to c k m ay and re g u la tio n s u n w ittin g ly p urchases, — p ro p o s a ls c ie n c ie s p o litic a l c o n trib u la w s d is c lo s u re s and ea. ea. ea. ea. ADDED BONUS “how M e e tin g s fro m ju s t-p u b lis h e d and b ro k e rs , c o u n te rm e a s u re s , c lu d e s copies copies copies copies m e n t in n o v a tio n s a n d v o te re p o rt in g T h is P ro m o tin g S to c k h o ld e r 2-5 6-10 11-15 16-20 p ro xy — s a le s break and p ro v is io n s re p o rtin g s p o tlig h te d by d e fi th e F in a n c ia l A n a ly s ts F e d e ra tio n . A w h o le s e c tio n https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis co vers m e e tin g __________ copies, EFFECTIVE SHAREHOLDER MEETINGS$________ Name Bank _ Title. Street City, State, Zip. (Please send check w ith order. In Missouri, add 4.6% tax.) spelled out in the minutes and handled aboveboard. In all instances where in surance is sold inside the bank, the bank should be reimbursed for all sup plies, postage and facilities used for selling insurance. I moved into one situation where the officers had been splitting creditlife commissions for years, unknown to the directors. I felt it was my duty to inform the board of this practice. There was some justification for the officers receiving the commissions be cause their salaries were extremely low. I requested that all income be reported through the bank’s books and that we grant bonuses to the officers until salaries could be readjusted. Many abuses arise when a loan officer gets direct benefits from insurance companies. Often, especially in smaller banks, a general insurance agency is operated inside a bank, sometimes with bank personnel doubling as insurance peo ple. The FD IC has issued cease-anddesist orders on this type of operation unless both directors and shareholders are fully aware of the circumstances. Payment for supplies or employees’ time should be made to the bank, and rent should be paid by the insurance agency. Sometimes, loan officers may work for outside appraising firms and be paid for their work. I have no objection to this as long as bank time and funds are not used. There are many other instances where bank officers are en gaged in oil production and other in come-producing activities that may affect their performance as loan offic ers. The board should be aware of these outside activities and should approve them. It may be distasteful to have our outside activities restricted because we work in a bank. However, there are many potential conflict-ofinterest problems, divisions of atten tion and energies and outright detri ments to the bank as a result of these activities. Banks have engaged in numerous other unethical or questionable loan activities. These include loans made under the Farmers Home Administra tion, Small Business Administration and oth er governm ent agen cies. While these agencies provide vehicles for making good loans, if they are used heavily and if the bank pursues these agencies to guarantee loans, there is a problem with acquiring questionable credits and servicing problems that a small bank may not be able to handle. I don’t want to give the impression that making loans guaranteed by these agencies is wrong. However, over- No Interest Prepayment WASHINGTON, D. C. — Pro hibition of prepayment of interest remains in force. The Depository In stitutions Deregulation Committee (DIDC) considered the request of Bank of Boulder, Colo., that the DIDC revoke its regulation on in terest prepayment, but decided not to accede to the request. According to Normand Bernard, the DIDC’s executive secretary, the committee believes retention of pro hibition against prepayment of in terest is desirable to avoid potential unfair comparisons among promo tional programs of depository in stitutions. This rule, says Mr. Ber nard, ensures that all depository in stitutions will be able to compete on equal terms for deposits. concentration and tendencies to direct q u estion ab le credits under these guarantees do present problems for some banks. Other questionable loan activities may include large concentrations of credit in one business or industry. This is not unethical, but it presents prob lems when this business concentration is hit with bad economic conditions. I might use as examples the practice of financing aircraft and over-the-road trucks. Some banks have tried to spe cialize in these types of credits in large amounts and invariably find them selves in trouble because of the special handling required and special prob lems that develop within those indus tries. Reciprocal loan agreements with officers and other banks sometimes have produced embarrassing results. Many officers don’t want to or cannot borrow from their own banks because of certain policies or restrictions. Prob lems arise when officers establish per sonal understandings that “I will lend you from my bank if you will lend me from your bank. ” These arrangements may lead to questionable loan approv als. Then, there are “straw” parties. This occurs where a fictitious name or a non-borrowing name is used, but the funds are diverted to other persons or corporations. This is done, in many instances, to avoid creating an overline with any one entity. It is a dangerous practice and examiners will tie those extensions together if they become aware of the situation. The problem also arises when there is only one source of repayment on the loans, and, if that source has difficult times or takes bankruptcy, there is no other place to go for repayment. MID-CONTINENT BANKER for July, 1981 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Anyone who has been in the lending business for as long as three years probably has encountered the practice of loans being requested and encour aged by brokered deposits not pledged by third parties. On the surface, such a loan may look good to an officer bring ing a $300,000 CD into his bank. However, if the deposit results in the making of a questionable loan without security for repayment, that loan will be in jeopardy. Examiners long have harped on the idea of not making out-of-area loans. Under the Community Reinvestment Act, banks are required to define their primary lending areas. We should stay within our basic lending areas, de pending on the sizes of our institu tions. There are rare instances when out-of-area lending might be appropri ate: If the borrower lives in the bank’s area, but has his business outside the area; or if the borrower lives outside the bank’s area, but the property on which the bank seeks to take a hen is in its area. Bankers should be careful about par ticipation loans with other financial in stitutions. There have been times when such loans have been repur chased because of credit difficulties even though the loans were sold with out recourse. If a loan is sold to another bank with an agreement to repurchase at the buyer’s request, that loan should be carried as a contingent liability on your bank’s statement the same as repur chase agreements or irrevocable let ters of credit. When we participate with another bank, or it participates with us, the credit should be accom plished without recourse and we, the purchaser, should take the same risk as the loan’s originator. Another point of concern is where a small bank is the lead institution on an extension of credit that far exceeds the bank’s lending limit. Many of us run into this difficulty with our lower lend ing limits, and so we sell participa tions. However, participating banks should be lined up and confirmed be fore the note is signed. How can bankers deal properly with these problems to keep themselves clear of any charges of incriminating or unethical actions? First of all, the loan officer, through reading and education, must know what practices are considered ethical and unethical and what ones are con sidered legal and illegal. The loan offic er’s honesty, integrity and professional status are more important than any one job. Do not feel the job you hold is the only job you will ever want or need, 51 and do not feel you will do anything to keep it. All your actions, especially those thrust on you, should be documented, not only in the loan file, but in copies that are kept in your personal file. Write down your understanding of the credit, who referred it to you, who had input into the credit decision other than you — and keep a copy for your self. Report immediately any discrepan cies and unethical or illegal requests that are made to you from another bank employee, director or customer. This should be reported in writing to the next higher authority in your bank (again, keep a copy). If the next higher authority is involved in the unethical credit request, that closes that door to you. There must be someone in man agement — your auditor or your direc tors — with whom you can level. If this avenue appears to be unwork able, turn to the regulator who ex amines your bank. Go to, or notify, the FD IC , the state commissioner’s office or the Comptroller of the Currency when major loan problems occur in your bank. They will give you anonym ity insofar as they can. You may want protection from in volvement if the loan situation in your bank blows up. Remember, your de fense for taking some unethical or illegal action cannot be that you mere ly were following your superior’s orders. We are old enough to deter mine right from wrong, and we must make that determination even though it may have an immediate adverse effect on our job longevity. • • Wilson New AIB President; Will Continue Reorganization During Bank Deregulation Ronald G. Wilson, assistant vice president, Valley National, Phoenix, was elected president of the American Institute of Banking at the institute’s convention in Kansas City recently. Mr. Wilson succeeds B. Mott Jones, vice p resid en t, F irst T e n n e sse e , Memphis. Mr. Wilson emphasized that educa tion is a lifelong process and pledged that the AIB will continue to meet the changing educational needs of the country’s full-service bankers during the deregulation process. He said he will continue to “press for the recognition AIB deserves and to continue reorganization efforts that will strengthen the institute’s position WILSON as the leading educator of bankers. “With deregulation blurring the dis tinctions between financial service in stitutions, educated and informed bankers could be one of the most de ciding factors in a commercial bank’s ultimate success,” he said. He outlined several programs he plans to initiate during his term, in cluding a five-year planning process, a balanced budget and blanket liability insurance for all chapters. He stressed that AIB will continue to explore alter nate learning formats so bankers will have a wider range of educational offerings to choose from, including more seminars, workshops and short term programs. Mr. Wilson’s service to the AIB in cludes a term as president of the Tope ka chapter and board service on the Central Arizona chapter. He has been an associate councilman and a district council member. Liberty Nat'l, Okla. City, Offers Health Care Plan Call Wilbur Hufham, President of First Alabama Bank of Montgomery. For your correspondent needs, 2 0 5 / 832-8218. Personal Banking From Professionals. firstAlabam a Bank È of Montgomery na 52 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Member FDIC Nearly 30% of the employees of Liberty National Corp., Oklahoma City, have signed up for what has been called Oklahoma’s first prepaid medi cal care program. Liberty made the program available to its more than 1 ,2 0 0 employees as an alternative to the HC’s standard health insurance program. The program is offered through PruCare of Oklahoma, a subsidiary of Prudential Insurance Co. PruCare was formed two years ago to organize and develop the state’s first health mainte nance organization. The plan contracts with a group of physicians to supply medical care for its enrollees. Physicians in the program are in the Central Oklahoma Medical Group, with facilities in Oklahoma City. According to L. W. Miller, senior vice president in charge of employee benefits for Liberty National Corp., advantages of the program include no deductibles or filing of claims. Medical care is paid for in advance through reg ular monthly fees similar to premium payments of regular health insurance. MID-CONTINENT BANKER for July, 1981 American Express Travelers Cheques MORE REASONS W H Y YOUR CUSTOMERS WILL ASK FOR THEM BYNAM E. Every year, lots of things are lost or stolen with people’s travelers cheques. Like credit cards, cash, and identification. T h at’s why American Express* Travelers Cheques has introduced 5 special services designed to help protect your customers during those times when they may need more than a travelers cheque refund. Extra vacation protection at no extra cost throughout the U .S . and Canada. Only from American Express Travelers Cheques. Check Cashing Credit Card Cancellation If your customers lose credit cards with their travelers cheques, we’ll help them cancel their cards. When they call our Refund Center to report their travelers cheque loss, they simply tell the refund representative that their credit cards are also missing. No matter what time it is, they’ll be switched 5 to someone who will assist in cancelling 4 all their U .S. and Canadian-issued cards. 24'H o u r Travel Service Hotline Temporary ID Card If they lose all their iden tification with their travelers cheques, we’ll issue them a temporary ID Following verification,*» they can pick up the ID at an American Express Travel Service office in the U .S. or Canada 1 during business hours. It’s an ID with their name and our name on it, so they can use us as a refer ence wherever they go. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis If they need extra cash any of our Travel Service or Representative offices in the U .S. or Canada will, following authorization, cash a U .S. or Canadian check for up to $ 2 0 0 during business hours. I «¿C: w not a m m rr o r c h e c k U iiw H iil 1 i g u a ra n tee ca rd If they need to change travel plans because of their travelers cheque loss, one of our refund representatives can transfer them to the American Express Travel Service Hotline which can help arrange air line, car and hotel reservations. Message Service If, following their travelers cheque loss, they need to notify someone of a change in travel plans and they’re having trouble reaching them on the phone, we’ll send a Mailgram® for them at no charge, anywhere in the U.S. or Canada. At any hour of the day or night. A M ER ICAN EXPRESS Nowweprotect more thanjust their money. Nowwehelpprotecttheir vacation. S&Ls Fare Better Than Expected Against Banks In NOW -Account Competition; Survey Reveals Near-$1,800 Average Balance HE NATION’S S&Ls did far bet ter than expected in the competi tive scramble for NOW accounts dur ing the first quarter of 1981, said W il liam B. King Jr., chairman, Madison F in an cial C orp ., N ash ville-head quartered marketer of services to the financial industry. Madison Financial recently released results of a two-part survey the firm conducted to monitor institutional re sponse to the introduction of NOWs. The most dramatic finding of the survey is that S&L NOW-account bal ances have exceeded even their own expectations. S&L NOW-account bal ances were thought to average about $1,200, with bank NOWs averaging about $6,000. The survey revealed the S&L average balance to be closer to $1,800 and the bank average balance to be slightly less than the targeted fig ure. The survey revealed that 95% of re sponding institutions offer NOWs and T P e rc e n ta g e o f N O W D e p o s its N e w t o S & L s as a F u n c t i o n O f M in im u m -B a la n c e R e q u ire m e n t $ 1 .0 0 $ 2 0 1 - $ 3 0 1 - $ 5 0 1 - $ 7 5 1 - $1000 FREE -$ 2 0 0 $300 $500 $750 $10 0 0 6(0VER MINIMUM BALANCE REQUIREMENT Note: Two respondents with free NOWs indicated average balances of approx imately $8,000 per account, which has weighted the results on this chart, giving a mean balance of approximately $1,700. Without the input of the two S&Ls, the mean balance in S&Ls with free NOWs is approximately $700. 54 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis that S&Ls are taking the aggressive lead in marketing the accounts. Banks based their marketing strategies on holding their own ground. Direct-mail solicitations to present customers and print media advertising, often empha sizing convenience and bank services, were the main marketing efforts by banks. S&Ls concentrated their NOW promotions along the same lines, but placed twice as many print ads as did banks. The major difference between bank and S&L NOW-account policy was pricing. Most institutions used mini mum balance or a combination of mini mum and average balance require ments as the pricing m echanism . Banks, with a national mean minimum balance requirement of $976, require more than twice the S&L mean mini mum of $435. “We feel that having the pricing edge in the NOW market is the main factor enabling S&Ls to report 46% of their NOW-account funds as new m o n ey ,” said L aw rence W. Kown, president, Madison Financial, “whereas banks report only 7% new money.” Banks claim that they are not being hurt by “run-off” as regular checking accounts are closed out in favor of NOW accounts at other institutions. By gearing up for NOWs with higher minimum balance requirements, the nation’s banks fully expected to lose a number of low-range (under $ 1 , 0 0 0 ) deposit DDAs to their competition. Bankers viewed it for the most part as an equitable and worthwhile trade-off. The low-range accounts were viewed as marginally profitable at best, and in line with this strategy, the survey re ports that only 8 % of banks’ first quar ter account terminations had closing balances of $ 1 ,0 0 0 or more. “We have found the figures on clos ing balances to be deceptive, since the survey indicates the money reported ‘run-off’ by banks is substantially less than the influx of new money’ re ported by S & L s ,” Mr. King said. “Whereas banks are settling for trans ferring already captured monies into NOWs, if the figures reported by both hold true, the S&Ls apparently are prying new monies out of the market. ” Speculation has it that many ac counts closed out during the first quar ter of 1981 at banks as low-range de posits (under $ 1 , 0 0 0 ) had in fact, been mid-range deposit accounts as recently as six months earlier. “We suspect that customers are di versifying their accounts, maintaining balances with several types of financial institutions or money-market funds,” said Mr. Kown. “We also believe that customers dispersing their funds in such a manner soon move to consoli date them. Their decision to close an account usually is preceded by a period in which they’ve allowed their account balances to dwindle. That’s why we believe that many appear to be low closing balance accounts three to six months prior to termination. Banks may discover that they have been los ing mid-range-balance customers who are capable of consolidating substantial balances and are prime candidates for future loan portfolios.” Factors listed by respondents deter mining NOW -account pricing pro vided no surprises. Retaining present deposit base, breaking even or making a profit and reaction to competitor’s moves are ranked highest, in that order. “What surprised us was that S&Ls P e rc e n ta g e o f N O W D e p o s its N e w t o B a n k s as a F u n c t i o n O f M in im u m -B a la n c e R e q u ire m e n t $1.00 $301- $501- $751- $1001 $1251 $1501 FREE -$300 $500 $750 $1000 -1250 -1500 &0VER MINI M U M BALANCE REQUIREMENT MID-CONTINENT BANKER for July, 1981 S&L N O W A v e ra g e B a la n c e As a F u n c tio n o f M in im u m -B a la n c e R e q u ire m e n t $ 3 ,0 0 0 $2 , 0 0 0 $ 1 ,5 0 0 tions as to the effects NOW accounts had on their market area and specifi cally on their particular institution. “We believe the survey will be an important tool for officers of financial institutions to use in planning future NOW-account marketing strategies and tactics,” said Mr. King. Institu tions participating in the survey re ceived copies of the report at no charge. • • People Relations (C ontinued fr o m page 44) $ 500 $ 1 .0 0 $201- $ 301- $ 501- $751- $1000 FREE -$ 2 0 0 $300 $500 $750 $1000 &0VER MINIMUM BALANCE REQUIREMENT also ranked equally the factors of breaking even or making a profit and retaining present deposit base as their most important factor. It is interesting to contrast the difference in minimum balance requirements, since survey results indicate that the majority of both banks and S&Ls believe they have priced their NOWs at their break-even point. Also ranking high for S&Ls, as one might expect from their behavior in the marketplace, was a desire to aggressively attract new de positors,” Mr. King said. Every commercial bank, savings bank and S&L in the nation was in vited to participate in the survey. Re plies from 2,384 banks and 571 S&Ls gave researchers a 15% response to use as a data base. The survey was de signed to gain factual and perceptual information from participating instituBank N O W A v e ra g e B a la n c e As a F u n c tio n o f M in im u m -B a la n c e R e q u ire m e n t $1.00 $301- $501- $751- $1001 $1251 $1501 FREE -$300 $500 $750 $1000 $1250 -1500 &0VER MINIMUM BALANCE REQUIREMENT the largest possible attendance at such events; banks — with their varied communications channels — can lend an effective hand in helping spread the message. A simple lobby bulletin board — listing events, locations and dates — brings this information to the holiday crowds visiting the bank. When prac tical, special announcements can be carried as a portion of the bank’s news paper, radio and TV advertising. This is inexpensive. It can be very effective. It’s a good opportunity for community public relations in the true spirit of Christmas. • Be a Depository for Christmas Fund-Raising Events. Christmas is almost synonomous with a multitude of fund-raising events. Almost all re quire a depository for money col lected. In many cases, by starting early enough, you can get some of these assignments for your bank. T ell each prospect the features (hopefully exclusive) your bank can offer — money counting, packaging, storage, etc. In addition, add as many hospitality touches as you can think of. Mercantile Trust, St. Louis, sets up a special lobby counter where solicitors can turn in their collections, watch it be counted (in coin counters), and get an instant report on their success. A musical combo and a coffee bar add a festive holiday spirit to the occasion — all of which generates an enthusiastic spirit and warm goodwill — even among the bank’s staff. For the organization, this provides a valuable essential of its fund-raising campaign. For the bank, there is good publicity coverage by all media, a heightened image as a good neighbor in the community, possibly even some potential prospects for future business — all at little cost or effort. • Capitalize on Your Community’s Heritage. Want something out of the ordinary for your bank’s Christmas? Look around. See what your area’s most noted for or famous for. Then MID-CONTINENT BANKER for July, 1981 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis dramatize it in your lobby. First National, Little Rock, is a per fect example of how to do this. Here, near the heart of the Ozarks, bank offi cials decided to stage a Christmas dis play with the theme, “Ozark Crafts of Christmas. Craft people from the Ozark Folk Center in Mountain View were com m issioned to create old-fashioned handmade ornaments for the trees. These included cornshuck dolls, handcarved wood trucks, woven baskets, spice balls and woven pieces. During the weeks before Christmas, crafts men exhibited their handiwork skills and produced examples of their wares. The public watched in fascination as pottery, quilts and woodcarved statues were formed before their eyes. In addition, native Ozark musicians attired in calico and jeans sang carols and played instruments such as banjos, dulcimers and autoharps. The public was enthralled and even groups of school children were brought in to see this innovative and educational enter tainment. Here, in capsule form, is a mix of what banks do at Christmastime to build goodwill. Some may work well for your bank. All can be idea stimula tors when you seek a customized pro gram of your own. Study your com munity. Consider the ways you might use the built-in goodwill of the Christ mas season to help your image. Start planning early enough so you won’t run out of time on some of the more ambitious ventures. People open th eir hearts more readily at Christmas. So should you. Show the public and your customers that you and your employees, deep under your banker shell, are some of the nicest people they know. Isn’t that what Christmas is all about? • • S e rv in g T r a y A v a ila b le ' ,-L j This serving tray, measuring about 9 " x 6 " , is available from Redwood House, North Arlington, N. J., as a giveaw ay for finan cial institutions for customers opening Christmas club accounts or for other occa sions. Its silver, non-tarnish finish never needs polishing. 55 ments are charged at a rate of $ 1 0 per transaction, and there’s no monthly Bank Programs fee. (C ontinued fr o m page 25) Customers receive monthly reports of all investment transactions. They also receive monthly statements re service charge of $5 for each check in flecting activities of their moneyexcess of five checks. As Mr. Lohman market accounts and income earned. explains, historically, M M Fs don’t In addition, they receive monthly generate much check-writing activity. statements reflecting checking and re For example, one well-known fund of serve-cash activity, as well as year-end this type indicates about one check is tax information. written per month per account holder. About two weeks after First Nation FMMA also includes an automatic al began offering FM M A , it had $5,000 reserve-cash line of credit, but opened 17 accou nts, with about the customer can apply for a higher $510,000 in invested deposits. Four of line if desired. There’s a $20 annual those accounts were new customers; fee, charged at the time the account is the other 13 already were customers. opened. The money-market invest Most of the money from the 13 came ment includes a monthly fee based on from First National’s statement-sav the average investment balance each ings account or NOW account, called month. This graduated fee ranges from “Smart Saver Checking.” The reason a minimum o f .025% monthly to a max for the low number of accounts, says imum of .075% monthly for an average Gary Hepburn, marketing director of balance of $15,000 or less. the bank, is that, although there have R ep u rch ase-ag reem en t in v est b een many in q u iries about the Bank's G o a l: Reverse M M F D rain -O ff ANK of Ravenswood, Chicago, is one of an increasing number of banks that have created instruments or programs to enable them to try to com p ete with m oney-m arket-m u tu al funds (MMMFs). This bank offers “MoneySystem,” a high-yield account with interest rates tied loosely to short-term Treasury-bill yields. With MoneySystem, John D. Van Winkle, vice president, de scribes the bank’s goal as “to slow and, hopefully, reverse the drainoff of financial-institution deposits to the money-market funds. ” The bank hopes this mechanism or one of many possible variations will be marketed quickly through the banking and thrift industries because, as Mr. Van Winkle puts it, “The sooner that happens, the sooner the regulatory inequities will disappear.” Continuing, Mr. Van Winkle says, “We are convinced that the prevalent lobbying thrust is misdirected. The general public, edito rialists, consumer advocates and legislators simply are not going to buy the idea of throwing manacles on the money-market funds, and the image of banks and thrifts resulting from such a lobbying tack will be painted as self-serving and not responsive to consumer needs. All that approach will gain is bad press, without any likelihood of quick, equitable regulatory change. Better, we believe, that we assume the offensive; better for the industry and better for the general public. “While the MMFs have taken on one major function of banking and deal from a position of strength afforded by their nationwide marketing networks, they do have some major problems. They can not compete by themselves on a one-to-one basis in terms of check processing; they cannot offer broad credit and other banking ser vices; they still represent an unfamiliar entity to the grass-roots populace; and, most of all, they are marketing a product that carries with it considerable investor risk. “It is our belief that we can get close to the MMFs in yield, while providing more security and a broad range of services — and do so with adequate margins.” B 56 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis account, people are holding off until their CDs mature, things of that na ture. All in all, Mr. Hepburn believes the new account is fulfilling its purpose: to keep money in Springfield that other wise would go to m oney-m arketmutual funds elsewhere. The bank offers six different funds to FMMA customers: (all yields were as of June 11) Dreyfuss Money Market, yield of 16.97% ; Fidelity domestic money market, 16.68%; Fidelity U. S. government, 16.94%; Dreyfuss Treas ury agency, 15.18%; Dreyfuss moneymarket tax-exempt, 6.50%; and Fidel ity money-market tax-exempt, 6 . 6 6 %. On the same date, for instance, Merrill Lynch’s Ready-Asset account was yielding 16.91%, and so First of Springfield’s FMMA was competitive. C ontinental Illinois C orp . on June 1, Continental Illinois Corp., Chicago, parent of Continent Illinois National, filed a registration statement with the Securities and Exchange Commission for a proposed public offering of $ 100 million of money-market notes, a new type of floating-rate-debt security. The notes will be due June 1, 1988. The notes will be offered in de nominations of $ 1 ,0 0 0 and multiples thereof. Interest rates on the notes will be adjusted weekly and be equal to the one-month com m ercial-paper rate, quoted on a bank-discount basis by the Fed. Interest will be paid monthly. Notes will be redeemable in whole or in part at Continental’s option at any time on and after June 1, 1983, at 100% of their principal amount plus accrued interest and will not have a sinking fund. Continental’s president, John H. Perkins, says the notes are designed to more closely meet current offerings in today’s money markets and are avail able in smaller denominations. He ex plains that commercial-paper rates fluctuate continuously and that the weekly adjustment to Continental’s notes will reflect these changes. Merrill Lynch White Weld Capital M arkets Group will m anage the underwriting syndicate. Net proceeds from sales of the notes will be added to the corporation’s general funds. City Bank, Dixon, III. This bank has created a 90-day instrument, called “T-Minus-2,” which floats at a daily rate of 2 % below the prim e rate charged by Chicago’s Northern Trust. Minimum deposit for this instrument is $100,000. These deposits, says Pres ident Richard W. Durkes, will be used to fund floating-rate commercial loans. The bank chose Northern Trust as a MID-CONTINENT BANKER for July, 1981 You know the situation: Often your cus tomers’ needs are beyond your capabilities. Is there a banker you can turn to for help? Yes. At Bank of the Southwest Earl Lassere and a group of correspondent bankers can help expand your range of services. With assistance in real estate lending, or equipment and crop financing. With transit processing. With solid advice on investments and current banking issues, and more. Expanding. Bringing new ideas and vitality. That’s the spirit of the Southwest. That’s the spirit we bring to correspondent banking. Call Earl Lassere, vice president, at (713) 751-6366. Bank of the Southwest. 910 Travis. Houston. MID-CONTINENT BANKER for July, 1981 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Bank of the Southwest 57 peg for “T-M inus-2” because, says Robert Eaton, vice president/cashier, City Bank is using that bank’s prime rate for some floating-rate loans and other uses. Thus, to maintain con sistency, the bank chose Northern Trust for the new instrument. Within about three weeks of its in troduction, says Mr. Eaton, “T-Minus2” had brought in about $300,000 in new money and $2 0 0 ,0 0 0 roughly in converted funds. He points out that his bank had tried an offering of a large CD in the local area some months back and was favorably impressed with the re sponse. He adds that it takes a little time to “scrape $ 1 0 0 ,0 0 0 together” be cause people may have the money tied up in other instruments or accounts. He illustrates the floating-rate part of the new instrument by pointing out that the rate was 171/2% when “TMinus-2” was introduced, then went up to I 8 V2, and was back town to 18% as of June 11. The new program is intended to ben efit all parties, says President Durkes. “For the investor,” he continues, “it offers an extremely advantageous re turn, with the assurance of even higher gain if the prime should rise during the period of deposit. “For City Bank, we will secure new lending power for commercial clients at a cost that is directly related to an ticipated income from such loans.” Landm ark B a n csh a res. A CD with a floating rate two points below the prime rate also was introduced last month by this St. Louis-based multi bank HC, It is obtainable for a mini mum of $ 1 0 0 , 0 0 0 , and its interest rate is adjusted automatically the same day the prime rate changes. The CD is available with a maturity of six-18 months, with interest payable month ly, quarterly or at maturity, and is in sured up to $100,000 by the FD IC . According to S. Lee Kling, the HC’s chairman, response has been beyond his expectations. B ank o f R av en sw ood . This Chicago bank has created a $2,500-minimumdeposit, high-yield instrument, called “MoneySystem,” with interest rates tied loosely to short-term Treasury-bill yields. It encompasses security-re purchase agreements, Bank of Ravens wood deposits and n o n -in terestbearing lines of credit. All funds in MoneySystem represent customers’ ownership of either direct obligations of the U. S. or deposit accounts fully insured up to $100,000 by the FD IC . It grants holders check-writing pri vileges and doesn’t impose service charges for regular personal activity. According to John D. Van Winkle, vice president, the bank perceived, about IV2 years ago, that some mechanism was needed, within the confines of existing regulations, to pro vide a safe high-earning, liquid vehicle that could compete with MMFs until laws are changed to allow commercial banks to compete in a more straightfor ward manner. In MoneySystem, says Mr. Van Winkle, the bank believes it has managed to offer customers an assurance of safety without involving them unduly in underlying complex ities. M orton Community B ank. Another bank that decided to try to stem the flow of money-market funds from its community is Morton (111.) Commu nity Bank, which has created what it calls simply Money-Market Account. It offers customers: 1. Money-market interest rates. 2 . Checking privileges. 3. Withdrawal anytime. Additionally, customers are covered by FD IC insurance up to $100,000 and the security of local deposits, says the bank’s president, Gordon Honegger, P h.D ., an economist. H ere’s how it works: The bank en ters into a combination deposit/line-ofcredit agreement with Money-Market Account customers. When a customer makes a Money-Market Account de posit, the funds are placed in a NOW account, earning 51/4%. Simultaneous ly, the bank lends the customer addi tional funds to be placed in a savings account. These additional funds also earn 51/4% interest. Assume the bank wants to net a 10% return to the customer in the MoneyMarket Account. The bank simply charges the customer enough interest for the money loaned to reduce the customer’s total return to 10%. The tran saction is expressed: M oneyMarket-Account interest = NOW in terest paid + savings interest paid — loan interest charged. “Getting all the problems solved has taken our accountants, attorneys and bank personnel and marketing agency nearly a year to complete,” says Dr. Honneger in explaining how the bank created its Money-Market Account. “Thousands of hours have been in vested, but now the package is com plete and works quite well. Actually, it works so well it’s our fastest-growing account by a wide margin. W e’ve hired two additional persons to work exclu sively on it.” He adds that promotional efforts have been minimal, and the bank has used only a small amount of direct mail because of the difficulty in handling the number of responses received. The bank s employees, says Dr. Honneger, believe the product is so much more attractive to customers than the NOW account that they’ve nicknamed it the WOW account. • • Christmas Stockings Available THE T O T A L BANK SYSTEM “designed for the commercial bank” On-line Data Processing / Providing Bank Growth w ithout Increased D ata Processing Costs WRITE OR GALL FOR A CONFIDENTIAL PROPOSAL IFtott T o tal S y s te m s In c. (303) 753-0295 1650 South Colorado Boulevard, Denver, Colorado 80222 58 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Colorful Christmas stockings are offered as bank premiums this year by Anderson Pre miums, Riverwoods, III. Made of heavy acrylic yarn, stockings come in two sizes: 13" at $1.95 each, and 19" at $2.50 each. Each stocking comes with personalized gift card bearing greetings from organization presenting it. Colors are red, green and white. Minimum order is 300 pieces. 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It could be the last piece of paperwork you handle for a long time. n Money Orders Official Checks Continuous Form Checks Please send me more information on Mr. Gil Rosenwald V.P.—Marketing and Sales Operations □ Money Orders Q Official Checks □ Continuous Form Checks Travelers Cheque Division American Express Company—37 th Floor American Express Plaza, New York, NY 10004 N am e _______________________________________________________________________ -T itle - I n s t it u t io n ______________________________________________ A d d ress- I___C it y - MID-CONTINENT BANKER for July, 1981 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis -S ta te - _Zip_ -J 59 Economic Recovery, Inflation, Consensus Receive Attention at Indiana Convention T ISN’T often that a public official asked to give an official welcome to a bankers convention gives a mini speech, and one that’s relevant to the banking industry! But that’s what hap pened at last month’s Indiana Bankers Association annual convention. Indianapolis Mayor W illiam H. Hudnut III put his weight behind President Bonald Reagan’s economic recovery program, lauded Indiana BankPAC and praised the civic lead ership of Indianapolis bankers. He likened the U. S. economy to a boat on the brink of Niagara Falls and said it was time to turn it around under the guidance of the new Administra tion in Washington. In speaking about Indiana BankPAC, he told the audi ence that he would have appreciated such a means of financial assistance when he was a congressm an. He stressed the importance of handing out funds discriminately — favoring those who support the free-enterprise sys tem. William H. Kennedy Jr., official candidate for ABA president-elect for 1981-82, and chairman, National Bank of Commerce, Pine Bluff, Ark., made his first appearance in the MidContinent area this year as a state bankers association convention speak er. He addressed the issues of inflation and deregulation, pointing to the prog ress bankers have made regarding those issues under the leadership of the ABA. He said that President Reagan has I William H. Kennedy Jr., (I.), convention speaker, and ch., Nat'l Bank of Commerce, Pine Bluff, Ark., and IBA Pres. Robert C. Laue chat in lobby of Indiana Convention Center, site of IBA convention. Mr. Kennedy is official nominee for ABA pres.-elect for 1981-82. given the nation a new opportunity to bring inflation under control with his econom ic recov ery program . He termed the program anything but a quick-fix attempt to stabilize the econ omy. Rather, he said, the program promises a reversal of the trend toward big government that has stagnated the economy. He called on bankers to make their congressmen aware that the banking industry supports the President’s program in its entirety. The ABA is determined to get de regulation accomplished, he said. Re lief from the compliance burden is a No. 1 priority. Customers of banks don t evidence appreciation or a desire for the burdensome regulations that cost them so dearly. There’s no evi dence that regulations have made it easier for the public, but there surely is evidence that regulations have made it harder to conduct banking business, he said. He also called for relief from govern ment pricing of bank services. The laws don’t change fast enough to keep up with changing economic condi tions, and, because of this fact, they hinder the business of banking. Mr. Kennedy said there’s general agreement that Regulation Q ceilings must be removed and that new gov ernment instruments are needed to enable banks to compete effectively with money-market mutual funds. He decried the fact that these funds aren’t restricted from reacting swiftly to changing conditions while banks can’t react, due to inflexible regulations. “Banks shouldn’t be exluded from any markets in which they can partici pate,’’ he said, “including the housing area.” Thrifts are ahead of banks be cause they enjoy more liberal regula tions. “The New Economic Program — Will It Work?” was the topic chosen by Mark H. W illes, former president, Minneapolis Fed, and now executive vice president/ehief financial officer, General Mills, Minneapolis. It quickly became apparent that Mr. Willes knows his topic well and he shared new insights on the workings of the economy and the effect he antici pates the President’s program will have on it. “We don’t know as much as we should about conducting economic policy or achieving better economic results,” he said. He added that it’s difficult to find a solution for an erratic economy when there’s no general con sensus on its cause. He said he’s con vinced that inflation is the root cause of today’s economic problems and he reasoned that government deficits and the printing of dollars are the basic causes of inflation. He said the U. S. has done the oppo site of what it should have done to curb New IBA officers are (from I.) Joseph W. Bibler — v.p.; Mark H. Caress — pres.; and Robert C. Rose — treas. They were installed at president's luncheon. 60 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis MID-CONTINENT BANKER for July, 1981 Speaker Mark H. Willes, e.v.p./chief finan cial officer, G eneral Mills, Minneapolis, fields questions after presentation on pros pects for President Reagan's economic re covery plan at convention business session. inflation and turn the econom y around. This is the result of tinkering with something that no one seems to understand. In other words, when you don’t know how the economy works, you’re at a decided disadvantage when you try to fix it! In addressing the possibility of suc cess on the part of President Reagan’s economic recovery program, Mr. W il les said he admired the President’s courage in tackling the issue in such a straightforward manner. Deregulation can be a positive force in the long run, but it can be “tough as nails’’ in the short run. He cited the example of oil industry deregulation and said the move ben efited the consumer even though it re sulted in higher prices. This is because it also resulted in more incentive to conserve petroleum due to the higher cost. Also, new profit opportunities have resulted in more exploration and a resultant glut of oil, which has vastly improved the energy picture for the U. S. and the world. He alluded to deregulation of the airline industry, stating that it’s been tough on the carriers, but good for con sumers. It will be good for the carriers, too, in the long run. He predicts a similar situation for banks when they are deregulated — a tough transition period will precede long-run benefits. Mr. Willes criticized the Reagan tax-cut proposal as originally pre sented as being not well founded. The effect would have been negative be cause the tax cut was too large and would have resulted in a larger federal deficit and more inflation. The allimportant point is that deficits are in flationary and must be reduced before any improvement in the economy can be achieved. He said he was pleased that the tax reduction is being modified in Con gress so deficits will be reduced and he predicted that a “happy and fortunate compromise” would take place. He explained that the final tax cut must be slightly smaller than spending cuts on a y ear-by-year basis. He agreed with the President that the tax cut should be made over a three-year period. “It’s the only way we can plan ahead, he said. Mr. Willes predicted that the Presi dent has a 50% chance of success with his economic recovery plan. Once it is in place, confidence will grow, infla tion will decline — and at a more rapid rate than expected. This will result in a significant decline in interest rates. ‘The stakes are very, very high, he said. A wide range of results was reported by John D. Weissert in a report on NOW-account activity in Indiana. Mr. W eissert, who is a member of the IBA’s marketing committee as well as president, Peru Trust, said 60% of the 278 banks responding to the commit te e ’s survey are taking a defensive posture regarding NOWs; thus, they are not being innovative in marketing the accounts. That leaves 40% taking a more aggressive posture. Most banks zeroed in on con v ertin g existing Derby pie w as popular item with conven tion-goers. President's luncheon desserts were served in exhibit area in innovative move by IBA to bring bankers and exhibi tors together. accounts rather than attempting to attract new accounts. Two responding banks opted to not offer the accounts until later and one bank converted every one of its eligi ble accounts to NOWs. The average minimum balance for a free NOW account is $ 1 ,0 0 0 and the average permonth service charge is $5. While most bankers appear to be content with NOW-account pricing, they are revising prices for other types of accounts. Two-thirds of NOWs in Indiana came from existing savings accounts and one-third from existing checking accounts — which means there was little or no movement of funds among institutions. The average balance per account is $ 6 , 2 0 0 . Indiana’s lieutenant governor, John M. Mutz, made a surprise visit to the convention to ask bankers to make use of a summary of 19 bills passed by the state legislature that will enable the state to attract new business and re MID-CONTINENT BANKER for July, 1981 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis duce unemployment. He stressed that a bill creating a network of develop ment funds in the state is in no way competitive with banks. The legisla tion provides an incentive for invest ment capital to be channeled into small industries in the state, he said. He asked bankers to help “sell” industrial development in their areas. IRA President Robert C. Laue, president, First Bank, Indianapolis, addressed the topic of competition. “Those of you who are golfers know that, in match play, you play your opponent, and in medal play, you play the golf course. We have been trying to play the thrift, the broker, the retail er, the credit card company, the travelers check company, the insur ance company and the other bank and we aren’t winning many holes. “We must never lose sight of our competitors, but perhaps we should give more thought to the market for services and match our game to that demand,” he said. Mark H. Caress, president, First National, Crawfordsville, was installed as IBA president during the conven tion, along with Joseph Bibler, chairman/CEO, Northern Indiana Bank, Valparaiso, as IBA vice president, and Robert C. Rose, president, American National, Vincennes, as IBA treasurer. Elected to one-year terms as members-at-large of the IBA board were Thomas L. D usthim er, president, First National, Elkhart; Thomas M. M iller, chairm an/C EO , Indiana National, Indianapolis; and Robert O. Swaim, president, Citizens State, Marshall. Don C. Stimpson, president, Peo ples Bank, L aw ren cebu rg, and Charles W. Phillips, president, Floyd County Bank, New Albany, were elected to two-year terms on the ABA governing council. Next year, the convention will re turn to French Lick. — Jim Fabian, Senior Editor. IBA V.P. Mark Caress (I.) and Convention Ch. Ronald D. Seals, pres., Edinburg State, confer prior to opening of first business session. 61 Despite Possibility Of Multi-Bank HCs, III. Bankers Undaunted HE NEWS from Springfield on the latest multi-bank HC bill (SB 578) was not good last month for the Illinois Bankers Association as it was holding its 90th annual convention in Chicago. At that time, the bill was on passage stage in the House. Within two days, the bill was passed. However, officers, members and office staff were not discouraged about the future, even though it will bring multi-bank HCs to Illinois — some thing the IB A had fought against for years. As William J. Hocter, IBA executive vice president, said in his convention report, the association now must de velop aggressive leadership in other areas; it must be supportive of Illinois banks at the federal level; it should move into marketing areas and focus on expanding its membership (there now are 1,010 members). Mr. Hocter suggested that the IBA work to strengthen regional organizations, reach out to individual banks and get suggestions from those banks. The IBA intends to remain a vital force in Illinois, he continued, and he asked conventioneers three questions: How do we market this association? How do we reach out and touch you? T What will cause you to stay with us or to leave? Bank structure was the subject of three of the five amendments to the IBA constitution adopted during the convention. Only one, Amendment No. 5, was not approved unanimously. However, it received the two-thirds majority needed for passage by being approved by 118 of the 172 voting de legates. The other 54 voted against it. Amendment No. 5 speaks to the ne cessity of having to submit to the mem bership all issues on structure. Until the amendment was passed, the mail ballot was the only way to contact members. The amendment’s sponsors pointed out that the fast-changing banking environment makes it neces sary for the association’s leadership to be able to act expeditiously as well as objectively on all banking issues, in cluding bank structure. This amendment preserves the mail ballot as one of three methods of changing IBA policy on bank struc ture. It provides two alternatives for making such changes — through con ventions or by the council of adminis tration. The term bank structure, as defined in Amendment No. 5, means: (a) form Two association officials, Llewellyn Jenkins (I.), ABA pres.-elect, and Jack D. Lemmerman (r.), IBA pres., are pictured at IBA convention last month. Mr. Jenkins, v. ch., Manufacturers Hanover Trust, New York City, spoke at convention. Mr. Lemmerman is ch./CEO, Nat'l Bank of Monmouth. or forms of bank ownership, including HCs; (b) number and types of facilities and additional offices, agencies or branches perm itted or prohibited apart from the main banking house of a bank; (c) number and types of banking functions prohibited or perm itted apart from the main banking house of any bank. Amendment No. 2 continues to have IBA policy determined at con ventions except in resolutions on bank structure; such resolutions must be submitted by the council of adminis tration by mail to the membership. However, this amendment eliminates the mail ballot if the council deter mines by a three-fourths affirmative vote that the resolution: (a) is consis tent with present association policy on bank structure or (b) is an emergency situation and, if so determined, the council may adopt policy relating to bank structure by a three-fourths affirmative vote. Other policy matters not inconsistent with any previous association policies may be deter mined by the council. Bank structure was defined in the section on A m endm ent No. 5. Emergency situation is defined by IBA bylaws as any proposed resolution, policy or action dealing with bank structure that requires a prompt deci sion and immediate action as certified to the council of administration by the affirmative vote of seven members of the executive committee. Amendment No. 3, also on bank structure, continues to allow the IBA New IBA officers are (I. to r.): pres., James A. Fitch, Chicago; 1st v.p., Donald R. Lovett, Dixon; 2nd v.p., Kenneth A. Skopec, Chi cago; and treas., Thomas F. Bolger, McHen ry62 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis MID-CONTINENT BANKER for July, 1981 Representative Dan Rostenkowski (D.,lll.), convention speaker, is shown with Jam es A. Fitch, 1st v.p., IBA, 1980-81, and incom ing pres. Mr. Fitch is pres., South Chicago Savings Bank. Representative Rostenkow ski is ch., House Ways and Means Commit tee. Howard K. Smith (c.), long-time TV news man, talks with W illiam J. Hocter (I.), IBA e.v.p., and Jam es A. Fitch, IBA 1st v.p., during convention, at which Mr. Smith spoke. president, if authorized by the council of administration, to submit any policy question by mail to the entire active membership. However, it also pro vides that resolutions on bank struc ture be submitted only if initiated by a two-thirds vote of the council present and voting or on receipt of a petition, signed on behalf of at least 50 active members, no more than 2 0 % of which are located in any single IBA group. Amendment No. 4, approved at the same tim e as Am endm ent No. 3, addresses IBA constitutional amend ments, all of which must be voted on at conventions by two-thirds of delegates present and voting. Under Amend ment No. 4, a proposed amendment must be submitted in writing to the council of administration no later than 60 days prior to a convention and signed on behalf of at least 50 active members, no more than 2 0 % of which are located in any single IBA group. The council may, by a two-thirds vote of members present and voting, initi ate proposed amendments without the requirement of active member spon sorship. The council must include a proposed amendment in its official notice of a convention, together with comments on it, if any. Any proposed amendment may itself be amended at the convention at which it’s presented by a two-thirds vote of delegates pres ent and voting. Am endm ent No. 1 changes the name of the IBA’s bank security com mittee to the bank operations commit tee. This amendment adds as mem bers of the council of administration chairmen of the state legislative and federal legislative com m ittees and appoints the executive vice president as a member of both the council of administration and of the executive committee. However, he is designated a nonvoting member of the council so as to be protected from undue pres sure when there’s a controversial or divided matter before the council. Four speakers from the nation’s capital talked exclusively or devoted part of their talks to President Ronald Reagan’s economic-recovery program. They were: Representative Dan Ros tenkow ski (D ., 111. ); C harles L. IBA Pres. Jack D. Lemmerman (I.) is pic tured with convention speaker, Charles L. Schultze, senior fellow, Brookings Institu tion, Washington, D. C. Mr. Schultze w as ch., Council of Economic Advisers, under former President Jim m y Carter. MID-CONTINENT BANKER for July, 1981 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Senator Charles Percy (R.,lll.) (back to camera) visits with IBA conventioneers be fore giving talk. Schultze, chairman, Council of Econo mic Advisers under former President Jimmy Carter, and now senior fellow, Brookings Institution; Senator Charles Percy (R. ,111.) and Gerald Lowrie, ex ecutive director, ABA government re lations. R ep resen tativ e Rostenkow ski, chairman, House Ways and Means Committee, assured his listeners that he is for a tax cut, but not the threeyear cut proposed by the President. He believes the Administration is bas ing its proposal on a “somewhat rosy” assumption that, by 1984, we will have a balanced federal budget, reduced in flation and lower interest rates. As a result, the Illinois representa tive said he will continue to fight for a 5% tax cut this year and 10% in 1982. What he wants to do, he told con ventioneers, is to create an atmos phere of investment so Americans will put their money in institutions of financial stability. In fact, Democrats must make it clear, he said, that they, too, realize government must shrink and that they want a tax package. His party would like a package that pro duces investment, savings and produc tivity. Mr. Schultze also advocated that a three-year tax cut not be enacted. He added that a two-year cut, coupled with a reduction in government spend ing, would not unduly aggravate infla tion because of the present slack in the economy. He voiced pessimism that the new Administration would balance the budget by 1984, as it has promised, while reducing inflation by half. Mr. Schultze suggested that the President postpone the last $45 billion on the $ 145-billion tax cut to see how the economy goes. If everything is all 63 Sponsors of various amendments adopted during IBA convention spoke on their am end ments before votes were taken. L. to r. are: Arthur F. Busboom, ch., Gifford State, who spoke for Amendment No. 2; Jam es W inningham, pres., State Bank of Arthur, Amend ments Nos. 3 and 4; and Gilbert E. Coleman, pres., Security Bank, Mt. Vernon, Am end ment No. 5. right in a few years, he added, then go ahead with the last $45 billion. If not, the last $45 billion should not be cut. Senator Percy told his fellow Illi noisans that he’s totally devoted to enacting the Reagan program and that he hopes to have this legislation on the President’s desk by August. Because of his position as chairman of the Senate Foreign Relations Com mittee, Senator Percy devoted most of his talk to international matters. He said a bipartisan foreign policy is needed, backed by a strong defense posture, underpinned by a strong economy. He emphasized that he was fighting for rights of American com panies, an effort aided by the fact that, in almost 25 years, he is the first chair man of his committee with an exten sive business background (he was named head of Bell & Howell in Chica go at the age of 29). He focused on Illinois, pointing out that it is the No. 1 state in export of agricultural commodities and the No. 2 state in export of manufactured goods. In Illinois, he continued, 80% of the land is under cultivation, and production of one out of three acres is shipped abroad. The senator said a concerted effort must be made to re-establish consen sus on principal elements of our na tion’s foreign policy: 1. Restore our econom ic strength. 2. Restore our military strength. 3. Have a more realistic and resilient attitude toward the Soviet Union. 4. Close ranks with our allies. 5. Create carefully differ- Senator Charles Per cy (R .,lll.) delivers IBA co nven tion address. He is ch., Senate Foreign Rela tions Committe. entiated policies toward the “third world,” an area growing at the fastest rate in the world. The ABA’s Mr. Lowrie said the spending cuts, if passed as they were put together at the time of his talk, would not be President Reagan’s pack age. He asked his listeners to actively support the President’s program. Turning to the plight of the thrifts, Mr. Lowrie said that because commer cial banks are in the black, but some thrifts are in the red, banks may be penalized to help those thrifts. He urged bankers to start a crusade against this philosophy. He pointed out that on June 25, the Depository Institutions Deregulation Committee (DIDC) was going to meet and decide on several proposals, including rein statement of the lA% differential on six-month money-market CDs in favor of the thrifts. He set these goals for banking: 1. Get inflation under control. 2. Get government out of the business of set ting your prices. 3. Open up opportu nities for banks to offer new services and products to customers. 4. Get rid of the layers of consumer-type legisla tion — the Community Reinvestment Act, Home Mortgage Disclosure Act, etc. New O fficers. James A. Fitch, presi dent, South Chicago Savings Bank, moved up from first vice president to president of the IBA during the con vention. Other new officers are: first vice president, Donald R. Lovett, chairman/president, Dixon National; second vice president, Kenneth A. Skopec, president, Mid-City National, Chicago; and treasurer, Thomas F. Bolger, president, McHenry State, and immediate past president, Inde pendent Bankers Association of Amer ica. — Rosemary McKelvey, Editor. Dolls Given to Charity Jon Armstrong (I.), ch., SJV Corp. and St. Joseph Valley Bank, Elkhart, Ind., helps bank employee Teddy Steely (2nd from I.) present more than 100 dolls dressed by bank em ployees to representatives of Elkhart Salvation Army. Dolls are display ed in bank lobby before being distributed to d isad van tag ed children just before Christmas. Former IBA presidents were spotlighted during one IBA convention session. They are shown in row closest to camera. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis N ew s About Banks and Bankers Alabama W. Dan Puckett, president/CEO , Central Bank of Alabama, was named Alabama’s outstanding young banker for 1981 at the Alabama Young Bankers convention in Biloxi, Miss., recently. Phillip N. Davis, vice presid ent, Farmers & Merchants, Centre, was named Ala. Young Bankers president at the convention. Other new officers include John J. Mullins, president, Leeth National, Cullman — vice pres ident; Robert Montgomery, vice president/correspondent division manager, C en tral Bank, Birm ingham — treasurer; and R. H. Giles, vice presi dent, First National, Scottsboro — secretary. AmSouth Bancorp., formerly Alabama Bancorp., is now listed on the New York Stock Exchange with the ticker symbol ASO. The HC is headquar tered in Birmingham. was with First National, Dothan. All the banks are affiliates of Southern Bancorp. F irs t N ational, Birm ingham , has electe d V ictor E . N ichol Jr. and Frederick O. Newman executive vice president/trust division and senior vice president/trust officer, respec tively. Mr. Nichol has been with the bank since 1969; Mr. Newman former ly was with American National, Chat tanooga. A. Fox deFuniak III, senior vice president, has been promoted to head the branch administration de partment. He joined the bank in 1963 and had been head of the national banking and corporate services group since 1979. The group includes the correspondent banking department. First Arkansas Bankstock Corp., Fittie Rock, has promoted Daniel C. Hor ton to executive vice president/chief financial officer, Fred C. Burns to vice president/secretary, W oo d lief A. Thomas to vice president/treasurer Stockholders of Southland Bancorp., parent of Merchants National, Mobile, have approved merger of the bank with First Alabama of Mobile County. PUCKETT DAVIS Willie F . W arren has been named president, Birmingham Trust Nation al. He formerly was chairman/president, First National, Anniston, a post he held since 1978. Prior to that, he Arkansas HORTON and John Woodworth to director/FABCO human resources. Worthen Bank, lead bank of FABCO, has promoted David Boerner and Michael Fendley to vice presidents; Douglas Milligan, Patrick O’Sullivan, Dennis Redmon and James Whittington to assistant vice presidents and David Phillips to assistant cashier. Got p eo p le o r jo b p ro b le m s? 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. F IN A N C IA L PLACEM ENTS A division ol Bank News 912 Baltimore Avenue. Kansas City, Missouri 64105 / 816-421-7941 MID-CONTINENT BANKER for July, 1 9 8 1 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Tom Chenoweth Tom Cannon Suzann Seymour 65 Gordon E. Parker has been promoted from president/CEO, First National, El Dorado, to chairman/president/ CEO. At one time he was a correspon dent bank officer at the old Union National of Kansas City. Wayne Harness has joined First State, Springdale, as vice president/manager of commercial and consumer lending. He formerly was with Worthen Bank, Little Rock. Illinois Daniel T. Zapton, vice president at Continental Illinois National, Chica go, has been named head of the Illinois division, succeeding John N. Fix, who now is head of global cash management in the financial services department. William F. Sanford, vice president, has been appointed manager of the bank’s new securities lending division. Mr. Zapton joined the bank in 1967 and Mr. Sanford has been with the bank since 1970. New vice presidents include Theodore E. Bulow, Kenneth J. Fetzer, Thaddeus P. Vannice in bond and treasury services; Robert R. Ingersoll, G. David Maletta II and Gary L. Stone in the special industries HEMMER WILLIAMS RAIFF department; Stanley R. Butcher and Michael J. Hamer in general banking services; John P. Davey and Andrew P. Siwulec in real estate services; Gary A. Spencer in financial services; Peter F. Meder in multinational banking services; Judith D. Domkowski in the U. S. banking department; William A. Saer in trust and investment services and Michael J. Kinney with Illinois Leasing Corp. Robert A. Williams Jr. has returned to Northern Trust, Chicago, as senior vice president/trust department, and Donald L. Raiff, vice president/senior economist, has been named head of the bank’s economic research depart ZAPTON ment. Mr. Williams also is CEO, Nortrust Farm Management and, from 1974 to the present, was president, Northern Trust of Arizona. Mr. Raiff succeeds Robert G. Dederick, who re cently became assistant secretary for economic affairs at the U. S. Depart m ent of C om m erce. Among new promotions at the bank are Norman T. Rosson, vice president/trust depart ment; Paul T. Orchart and Thomas E. Payne, second vice presidents in the international and personal banking de partments, respectively. First National, Belleville, has named Gary Hemmer administrative assistant and Robert Martin assistant vice president/data processing. Mr. Hemmer was formerly in the correspondent bank division at First National, St. Louis. Owen Steinweg was promoted to vice president/data processing and Steve Parrish was named assistant cashier/security officer. Lewis G. Laughlin has been promoted to executive vice president, Illinois State Trust, Belleville. He joined the firm in 1979 as vice president. PARK EAST HOTEL70 Years in Banking! 9 1 6 E. S ta te S t., M ilw a u k e e , W l 5 3 2 0 2 LOCATION: P h o n e : 4 1 4 -2 7 6 -8 8 0 0 Pa**port Inn Walking distance to downtown Civic Center & Performing Arts Center Across from Milwaukee’s famous Art Center 20 minutes to airport ACCOMMODATIONS: 170 designer rooms & suites overlooking Juneau Park & Lake M ichigan— free parking Honeymoon facilities with king size tubs for two RESTAURANTS: Fine dining in the “ Garden Restaurant" Park View Lounge with live entertainment Park East Coffee Shop & room service MEETING FACILITIES TO 200 SWB $35-$48 DWB $43-$56 Suites up to $125 William C. Wolf-Manager the BEST VALUE for QUIET COMFORT \ CALL TOLL FREE: 800-238-6161 / 66 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Henry D. Karandjeff (I.), honorary chair man, Granite City Trust & Savings, was honored recently for his 70 years in bank ing. Award w as presented by Drew Karandjeff, bank president and grandson of Henry, at bank's 20th annual awards dinner last month. MID-CONTINENT BANKER for July, 1 9 8 1 form erly was with F irst National, Topeka. Kentucky LARGUIER Glenn W. Norman has been promoted from senior loan review officer to vice president at First National, Louisville. Bank of Lexington has been acquired by Kentucky Bank-Shares, Lexington. Bruce L. Dahltorp has been elected president/chief operating officer, Cen tral National Bank and Central Nation al Chicago Corp. Jackson W. Smart Jr. remains as chairman/CEO of both firms. He had been president since joining the HC in 1977. Mr. Dahltorp formerly was with LaSalle National, Chicago. Indiana Henry S. Faurest Jr. has been pro moted to executive vice president at Floyd County Bank, New Albany. He joined the bank in 1966 as a lending officer. Jon L. Walda has been appointed vice president/corporate division at peo ples Trust, Fort Wayne. He’s assigned to the commercial loan department. Madison Bank has been acquired by Ohio Valley Bancorp., Madison. Citizens Bank, Jeffersonville, has been acquired by CB Bancshares, Jefferson ville. Kansas Leitchfield Deposit Bank has been ac quired by Leitchfield Deposit Baneshares. The HC also has acquired the B. S. Alexander Insurance Agency in Leitchfield. Downey M. Gray III has been in stalled as president, Louisville AIB Chapter. He is with Liberty National. Also installed were Betty M. Berger, First National, Louisville — first vice president; Jerry Fletch er, Bank of Louisville — second vice president; Betty C. Peters, United Kentucky Bank — trea su rer; and Paula B. Cravens, Liberty National — secre tary. Louisiana Bank of New O rleans and New O rleans Bancshares have elected James D. Cole, president/CEO, Newpark Resources, to their boards. Sidney G. Larguier Jr ., vice presi d ent, W h itn ey N ational, New Orleans, has been elected president, New O rleans A IB C hap ter. Also elected were Shirley Favalora, Nation al Bank of Commerce, Jefferson — first vice president; Malcolm Schwarzen- bach, First National Bank of Com merce, New Orleans — second vice president; Jeanne Roche, Hibernia National, New Orleans — secretary; Fred Rittler, Whitney National, New Orleans — treasurer; and James Ter rell, Bank of New Orleans — ex-officio officer. Mississippi Deposit Guaranty National, Jackson, has promoted Paul A. Carruba, E. Frank Fillingim Jr., I. Marie Love, Frank W. Martin Jr ., Stephen D. Taylor and R. Mark Watkins to vice presidents. Mr. Carruba joined the bank in 1972 and is in the account ser vice administration area. Mr. Fillingim has been with the bank since 1978 and is in the metropolitan department. Miss Love joined Deposit Guaranty in Greenville in 1963. Mr. Martin has been with the bank since 1964 and is in the loan review departm ent. Mr. Taylor joined the bank in 1976 and is in the corporate planning and research department. Mr. Watkins has been with the bank since 1968 and is in state branch administration. First National, Derby, has named J. Bryant Green assistant vice president and Robert C. Ward consumer loan manager. Mr. Green formerly was with A m erican N ational, B ax ter Springs, and Mr. Ward formerly was with Boulevard State, Wichita. David A. Inskeep has been appointed vice president/loans and assistant secretary at First Citibank, Olathe. Kent S. McKinney has joined Union National, Manhattan, as assistant vice president/commercial loan officer. He BflNKMflTIC® 24-Hour Automated Teller Machine Network! Kansas’ Fastest Growing! MID-CONTINENT BANKER for July, 1 9 8 1 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis FILLINGIM CNB TAYLOR CARRUBA COMMERCIAL NATIONAL BANK Max 6TH & MINNESOTA AVEN UE KA N SA S CITY, KA N SA S 66101 Member F.D .I.C. 913 371-0035 LOVE MARTIN WATKINS Lloyd Burton Dickerson 67 Missouri First Union Bancorp., St. Louis, will ask shareholders to approve a change in its name to Centerre Bancorp, at a special meeting August 26. The pro posed name change also is subject to regulatory approval. If both groups approve, First National in St. Louis and each affiliate banking member of First Union will be renamed Centerre Bank. St. Louis Union Trust Co. will becom e C enterre Trust Co. of St. Louis. The changes would become effective next January. R. Quinn Fox, who is in the correspon dent banking department at St. Louis’ First National, has been promoted from assistant vice president to vice president. Also elected vice president was James R. Lanigan, bond depart ment. Named assistant vice presidents were John J. Dwyer Jr., commercial lending, and Bryan P. McWeeney, op erations. George W. Porter, vice president, Commerce Bank, Kansas City, has been named manager of the bank’s agribusiness department. Mr. Porter joined the bank in 1973. He also is the 1981-82 chairman of the Young Bank ers Committee of the Missouri Bank ers Association. Andrew N. Baur has been elected chairman/president/CEO, St. Louis County Bank, Clayton, succeeding Merle M. Sanguinet, who has retired following 29 years of service to the bank. Mr. Baur formerly was president/chief operating officer, and joined the bank in 1978 as executive vice president/director. He formerly had been president/CEO, Commerce Bank, St. Louis, and prior to that had been a vice president at Mercantile Trust, St. Louis. He joined his first bank — First National, Atlanta — in 1967. Mr. Sanguinet will continue as chairm an/president/CEO, County National Bancorp., parent of St. Louis ALEXANDER 68 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis HUSAIN FOX LANIGAN BAUR PORTER ROSS County Bank. He joined the bank in 1952 as vice president/installment credit and was named chairman/CEO in 1975. He entered banking in 1936 at the old Mercantile-Commerce Nation al, St. Louis. First National, Kansas City, has pro moted Dudley Alexander, David P. Ross and Darrell E. W erner to senior vice presidents. New vice presidents include B. Spencer Heddens III, Har ry J. Kelly, Richard A. Marks and Phi lip T. Rogers. Laurel M. Crane and F. Kent Thieman have been promoted to assistant vice presidents; Lyle W. Brizendine and Jean F. Daniel were named trust officers; Penny J. Burton and Rhonda Holman were elected assistant cashiers; and Luann Bartkoski, Richard S. Jones and Mary A. Trabue were elected assistant trust offi cers. M ercantile T ru st, St. Louis, has elected Akbar Husain senior vice pres ident and promoted Victor T. Zarrilli to assistant vice president. Mr. Husain joined the bank in 1977 and heads the international division of the corporate GIDDENS WERNER SANGUINET banking departm ent. Mr. Zarrilli joined the bank’s trust department in 1973. Bart Thomason has joined Country Club Bank, Kansas City, as vice president/commercial loans and business development. John V. Giddens has transferred from First National, St. Joseph, where he was vice president/data processing, to First Stock Yards Bank, St. Joseph. He also was promoted to executive vice president. Both banks are subsidiaries of First Midwest Bancorp., headquar tered in St. Joseph. James M. Cox has succeeded Mr. Giddens as vice presi dent/data processing, First National. He comes from First National, Salina, Kan. First Mo. Elects Directors Thomas C. Guyton, vice presi dent, First National, St. Louis, and Dale Wolf, treasurer, Missouri Pub lic Service Co., Kansas City, have been elected to the board of First Missouri Development Finance Corp., Jefferson City. Steven J. Dust, director, Missouri Division of Community and Eco nomic Development, was appointed by Governor Kit Bond to serve as ex-officio director. First Missouri Development Fi nance Corp. has 240 member banks and has authorized in excess of $33 million in loans to Missouri business firms, helping to create or retain more than 6,500 jobs. COX MID-CONTINENT BANKER for July, 1 9 8 1 Jerome Scott Jr. Dies KANSAS CITY — Jerom e H. Scott Jr ., 58, died May 29. He was an advisory director, United Missouri Bank, which he joined in 1967 as assistant vice president. He moved up to vice president before being James Purcell, Edward Brockman and William Piskorski to assistant vice presidents; and Joanne Schalbar, Mar sha Douthett and Ruth Pellegrino to assistant cashiers. was with a bank in New Jersey. Karren Darrough, assistant vice president/ personnel, has been designated certi fied compensation professional by the American Compensation Association. Roswell State has changed its name to First Interstate Bank of Roswell. D. Leonard Hope has joined First National Bank and First Bancshares, Bartlesville, as financial vice presi dent. He formerly was on the faculty of the University of Kansas, Lawrence, and is a CPA. Oklahoma Josh C. Cox Jr. has been named presi dent, First Oklahoma Trust Co., and senior vice president, First Oklahoma Bancorp., Oklahoma City. Among his duties are development of marketing programs and new products. He pre viously was president/CEO, Trust Co. Tennessee named executive vice president in 1968. In April, 1971, Mr. Scott was elected vice chairman and, the fol lowing December, was elected pres ident. He again assumed the vice chairman’s post in 1979 and was named advisory director last Janu ary. He also was director/secretary, United Missouri Bancshares, United Missouri Bank’s parent HC. United Missouri, Kansas City, is offer ing personal financial services, a new department to provide personalized banking assistance. Leone Park, senior vice president, supervises the depart ment and Martha B. Peel and Frances S. Bentzinger staff the department as financial services officers. Died: Virgil Shirley, 70, one of the founders of Hardin State, on May 26. A farmer/rancher, Mr. Shirley had been a director of the bank since helping start it in 1940. COX of Colum bus, Ga. F irst National, Oklahoma City, has named the follow ing as vice presidents: William T. Ber ry, agriculture; Larry W. Coy, finan cial serv ices; and V in cen t G. Melashenko, trust. Named assistant vice presidents were David M. Jones, financial systems; Greg V. Tower, agri culture; and Richard S. Zalko, audit ing. Fourth National, Tulsa, has appointed Paul M. Giblon as assistant vice presi dent/commercial loans. He formerly Dan M. Laws III, vice president, Hamilton Bank of Johnson City, has been named head of the newly estab lished retail credit administration group. Eddie W. W ard, assistant cashier, was named manager of the South Johnson City Branch. Texas Republic National, Dallas, has pro moted Alex J. Eckensberger to senior vice president/installment lending and credit card divisions, and named Floyd D. Holland and Warren M. Newman ECKENSBERGER Laura W. Fitch has been promoted to senior vice president/head, commer cial lending division, at First National, Santa Fe. She joined the bank last October, following 24 years’ service with a bank in California. F irst N ational, A lbuquerque, has promoted Noel D. Behne to senior vice president/com m ercial loans; Joseph C. Nevins and Dennis O. Nilan were promoted to assistant vice presi dents at Third National, Nashville, re cently. Mr. Nevins is in consumer credit; Mr. Nilan is in bank systems. Convenience Center Opened New Mexico W . R. “ R an d y” Shipp has b een appointed senior vice president/operations at First National of Dona Ana County, Las Cruces. He previously was examiner in charge of the Las Cruces sub-regional office of the Office of Comptroller of the Currency. Groundbreaking cerem onies were held recently for Commerce Center Office Park and its first building, to be occupied by Commerce Bank, Oklaho ma City. The bank will occupy the first floor of the three-story building. Com pletion is expected by March, 1982. Fourth National, Tulsa, opened its new East Lobby Convenience Banking Center last month. The facility is accessible from Sixth Street and includes two ATMs, a night depository, a new-accounts department and a walk-up teller station. $1,000 in cash was given away during the grand opening in connection with demonstra tions to acquaint customers with ATM op eration. MID-CONTINENT BANKER for July, 1 9 8 1 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis vice presidents in the funds manage m ent departm en t. Anthony M. Padinha has been promoted to vice president/information systems and services and Douglas W. Graham has joined the bank’s human resources de partment, moving from First National, Midland, where he was vice president/ personnel director. F ro st National, San Antonio, has promoted Thomas E. Banks, Freddie 69 T. Jones and Charles Literati to vice presidents and named Norine Cham b erlain , Donna Chapman, W illie Davila and Susan Taylor assistant vice presidents. Kenneth T. Murphy, who was presi dent, First National, Abilene, became president/CEO June 15. W alter F. Johnson, formerly ehairman/CEO, continues as chairman. Ronald Fancher has joined the bank as executive vice president/director. He formerly was senior vice p resid en t, F irst National, Lubbock. Creative Financing (C ontinued fr o m page 20) would attack as being police-state tac tics. They wouldn’t be such because they would be voluntary. The student would be asked to submit his or her fingerprints with the loan contract. Fingerprints would be essential be cause of the high error rates in the social security program, said by the General Accounting Office to be in the 3% area. (Students who have looked at the data conclude that the figure prob ably is closer to 6% .) Thus, there would have to be a strengthening of social security internal controls that would be tied to handling the collec tion mechanics of the college studentloan program. Because these loans have a rather extended payout ratio, they don’t appear to be appropriate as invest ments for the tvpical commercial bank. H owever, commercial banks could participate in writing loans, packaging them and selling them in secondary m arkets. Then trust departm ents would find student loans attractive. Because interest rates would be tied to current prevailing comparable rates, there shouldn’t be any loan discounts. As a matter of fact, if rates were tied to a spread somewhat above prevailing market rates, a premium likely would develop in the sale and purchase of these participations. A secondary market would be avail able to provide liquidity to investors. Many technical details would have to be resolved. At present, the Social Security Administration is adamant in not cooperating in anything as con structive as the above proposal. Leg islation would be needed to force par ticipation. The interest rate charged college students would include an amount to cover the added costs to the Social 70 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Security Administration for running the program. The fingerprint require ment would be coordinated with the F B I, which maintains the nation’s largest fingerprint library. Finger prints would be used to establish the audit trail of not only the student loan but, subsequently, for drawing ben efits from the social security system. Note that, if a student became phys ically incapacitated or died, the insur ance policy on the loan would auto matically pay off. Similarly, there could be a policy coverage for unem ployment. In this case, the unemploy ment period would be the determining factor on the amount of amortization of principal and interest on the student loan. There would be provision for accel eration of payments if the student wished to pay off the obligation before its normal maturity. The actual matur ity of the loans would be indetermin able in a finite sense; but, with experi ence, the actual time for average amor tization should become established. An immediate outcry would arise that such a plan would overburden our young people as they enter adulthood. They would be saddled with from $15,000 to over $60,000 in debt (the latter figure applies to medical stu dents). If we assume an annual garnishment of 10% of the loan from $15,000 to $60,000, a not unsupportable burden results. There are two concepts of taxation. One is to tax those who are benefi ciaries of the government’s service and the other is more of a sumptuary con cept in that the individuals or com panies aren’t the beneficiaries. The former historically has been a much more ethical, rational and logical con cept of taxation. It’s probable that today some stu dents cavalierly are taking loans with no strong intent to repay.They may not wish to assume the burden of repay ment through the social security sys tem. This is all well and good because it is their own free decision. For stu dents who are sincere in their motiva tion for a college education, there should be no strong opposition. The fact that loan payments would be accelerated should a student drop out of college could be a strong motiva tor for serious study. Normally, I would prefer to have the private sector handle a student-loan program . However, with existing federal institutions in place serving basically as record keepers and collec tors of tax payments of student loans, there will be a partnership arrange ment whereby the private sector does the contributing of the funds, the placement of the loans and the like, but the federal government — through its social security subsidiary — pro vides a system whereby lenders have an assurance that the loans will be paid off autom atically by the student. Through insurance of various catego ries, loans would be paid up in the event of any adverse situation. Insur ance companies would be — and prob ably should be — privately operated and not agencies of the government. As noted earlier, there is little likeli hood that such a system would ever be considered seriously by the govern ment. Still, it would be interesting to see how such a system would work. It could save taxpayers billions of dollars and provide a workable vehicle for se rious students to have access to reason able credit at reasonable terms from financial institutions. • • “Letters *£«Editor” v_________________ y To the Editor: There is an article in the May 15th issue of M i d - C o n t i n e n t B a n k e r which discussed the defeat of legisla tion to regulate money-market-mutual funds (M M M F s) in Kansas and Okla homa. While most of the comments in the article are basically correct as to the chronology of events in the Kansas Legislature, there was one comment which deeply concerned me and other members of the KBA stafL In the first paragraph, the reporter states that “both Oklahoma and Kansas bankers have suffered hu m iliatin g (emphasis added) losses at the hands of the pro-m oney-m arket-funds lob byists.’ I strongly object to use of the word “hum iliating,” which implies that, in some way, the standing of the KBA and Kansas bankers was dimin ished by defeat of Senate Bill 131. There certainly is no indication that this was the case at all. To say that defeat of SB 131 was “frustrating” to Kansas bankers would have been more accurate. When one sees a massive media blitz of half-truths and innuen does launched, during which the M M M F people spent more in four days than the KBA will spend in an entire session lobbying all legislation, it can prove to be quite frustrating. Had this particular bill been a part of the KBA legislative program author ized by our state affairs commission (which it was not) and if the KBA had MID-CONTINENT BANKER for July, 1 9 8 1 pronounced to the world that it would get such legislation passed no matter what the odds were (which it had not), then use of the term “humiliating” might have been appropriate, but given the circumstances surrounding the action on SB 131, that was a very misleading term to have used. I also am wondering why the term “humi liating” was used even if it had been the correct term. If the article had appeared in New R epublic, I would not have been surprised, but in a magazine that speaks mainly to the banking com munity, I see little m erit in using terms which place an association or banks in a bad light with their peers in the industry. We have and will continue to have the highest respect for the quality of journalism M i d - C o n t i n e n t B a n k e r displays, and I realize that in the broad sweep of issues confronting the bank ing industry, this may seem like a petty issue. However, we hope that in future articles, your reporters will weigh carefully the adjectives used in de scribing reactions to legislative deci sions. Sincerely, James S. Maag Director of Research Kansas Bankers Association Bankers Assail Banks must work to increase productivity by improving operational efficiency, reducing operating expenses through technological changes and developing product management/pricing strategies. — F r a n k B . H o w e r J r . (C ontinued fr o m page 24) the markets have not only discounted but outraced “the hoary and outmoded rules and regulations that continue to limit the banking industry’s ability to innovate and respond competitively. While it obviously is a difficult and complicated problem, the solution in my opinion is not to regulate the new competitors but to allow banks proper freedom to compete in the public in terest.” Mr. Perkins stressed the point that it’s not competition that is menacing the banking industry today but the artificial restraints and regulatory re strictions that are hampering it at the same time that such restrictions are powerless to prevent the rest of the market from moving ahead. “We must look at the other side of the competitive cloud by carefully ex amining the structural developments that are taking place in the market and reevaluating industry policies to make sure they will meet the needs of the industry and those it would serve.” He said this process of examination already is occurring in the form of var ious current studies, including con tinuing discussions by the ABA’s bank ing leadership conference. He said the ABA has taken no positions but is simply fulfilling its responsibility to ex amine significant issues to decide what, if anything, should be done. “Banks are part of what today is a far more comprehensive financial services industry, with a growing number of aggressive nonbank competitors and a regulatory system that’s 50 years out of date,” Mr. Perkins said. “This is the modern truth that must be recognized. “Our purpose should be to work in dividually and along with industry groups to keep abreast of current de velopments, appraise the issues re sponsibly and formulate policies that will support a healthy environment for commercial banking. Funds to cause changes in banking. The staggering growth in moneymarket mutual funds (MMMF) and re cent mergers and takeovers in the financial world unquestionably will cause changes in the banking industry, said Frank B. Hower Jr., chairman, Liberty National, Louisville, to M i d C o n t i n e n t B a n k e r ’ s editors. “We should expect more mergers in The "evolving competitive picture, carrying with it struc tural changes in the industry, is making it more and more publicly evident that the markets have not only discounted but outraced the hoary and outmoded rules and regula tions that continue to limit the banking industry's ability to innovate and respond competitively." — J o h n H . P e rk in s MID-CONTINENT BANKER for July, 1 9 8 1 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis ED ITO R S N O TE: W e recog n ize that the K ansas b an k ers took on a trem endous jo b in trying to im pose regulations on m oney-m arket-m utual fu n d s, an d ou r ch o ice o f the w ord “hum iliating ’ to d esc rib e th eir loss was an unfortunate one. Banking leaders across the country have com e to realize that any effo rt to c u r b M M M Fs, e it h e r on sta te o r national levels, is doom ed to fa ilu re. Instead, they now realize it will be m ore productive f o r com m ercial banks to seek parity with MMMFs so that these banks can stop the trem endous outflow o f fu n d s fr o m th eir com m uni ties. the future in an effort by brokerage firms and other financial entities to compete with Merrill Lynch, Amer ican Express/Shearson and Prudential/ Bache. These mergers will, in turn, cause a proliferation of checking-type services and credit-card access ser vices similar to those currently offered through Merrill Lynch’s cash manage ment accounts,” he said. “As I see it, three important factors will cause M M M Fs to become less attractive in the future: • It is the interest rate, and the in terest rate alone, that has led to the success of the funds. Banks soon will be able to offer competitive instru ments. • The funds will have to overcome resistance by individual brokers, since no commissions are paid on these accounts. • There is dissension in the broker age industry as to the profitability of the funds. Better organizational oper ating and marketing capabilities must be developed if the funds are to remain successful.” Other clouds in the sky are sug gested by past experience, Mr. Hower said. The in su ran ce in d u stry ’s attempts to cross-sell and integrate services have not been particularly successful. The one-stop shopping concept isn’t new; it’s virtually no further along than it was 10 years ago. “The banking industry, however, can hardly sit by idly to see if the cur rent scenario ends in success or failure. Steps in the right direction already 71 have been initiated, and in the final analysis, there may be positive results for the banking industry. ” One of the prime needs is the lifting of regulations that apply to banks but not to brokerage firm money funds, he THE MISSOURI DEPARTMENT OF REVENUE ANNOUNCES COMPETITIVE BID PROCEDURES The Missouri Department of Rev enue is investing available funds under its control on a competitive bid basis and wishes to expand its list of eligible banks. If you are not presently on the Department of Revenue's bid list through pre vious request and are interested in bidding, please submit your name and address to.- Investment Officer, Missouri Department of Revenue, P. O . Box 629, Jeffer son City, MO 65105. Detailed bid procedures will be provided to all responding banks. You'll Get EXTRA Profits From Th e 4 M anagem ent C ycle s . Completion— Evaluation m How Do We Get There? Where Are We? M Where Are j ^ r We Going? A WITH OUR HELP AND PROVEN SYSTEMS CRANK^\1DE i n c Professional Bank Consultants 7 3 4 West Port Plaza Suite 2 5 5 St. Louis, Missouri 63141 3 1 4 -4 3 4 -8 8 9 9 72 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis said. The advantage this gives the brokerage industry is patently unfair, and as the current climate in Washing ton leans heavily toward deregulation, it’s much more realistic to expect de regulation regarding rates and re serves than to expect restrictions on money funds. ‘Both Visa and Interbank have taken steps to form money-market funds, which might provide banks with a conduit to compete on an equal basis,’ he said. ‘When — and I stress when rather than if — banks are allowed to compete on an equal basis, they will recapture deposits that have been lured away by the higher interest rates money funds currently are able to offer.’’ He added that the banking indus try’s position is strengthened by the fact that banks already have the tools in place and the experience to deliver checking and savings services to cus tomers, and in the end, it is fairness and service to the customer that must be considered. The saver, as opposed to the investor, will look to the services of banks if regulations (or deregula tions) permit banks to compete equi tably. “The time has passed, though, when a bank can look to increased volume as its prime source of earnings growth. Rapidly escalating costs of funds will put additional pressure on pricing products and services and there will be a need for development of new sources of fee income. ’’ Banks must work to increase pro ductivity by improving operational efficiency, reducing operating ex penses through technological changes and developing product management/ pricing strategies, Mr. Howersaid. •• Hagan & Associates, Tom ...................................... Harlan Co., John H ..................................................... Harris Tru st & Savings Bank, Chicago ................. Liberty National Bank & Tru s t Co., Louisville .. Liberty National Bank & Tru s t Co., Oklahoma City Manufacturers Hanover Tru s t Co., New York . . . Memphis Bank & Tru st Co................................ 11, Mercantile Bancorp., St. Louis .............................. Missouri Departm ent of Revenue ......................... Missouri Encom , In c................................................... Mosler Safe Co............................................................. National Am erican Bank, New Orleans ............... Park East Hotel ......................................................... Prem ium Group ......................................................... Salem China Co........................................................... van Wagenen Co., G. D .............................................. W hitney National Bank, New Orleans ................. 72 13 15 33 2 3 40 5 72 16 45 47 66 35 28 6 17 TRU ST BANKERS 1 -5 Y e a rs E x p e rie n c e • • • • • Trust/Estate Admin. Trust New Business Trust Operations Trust Investments Pension Admin./Sales Bank experience necessary for these attractive opportunities with large or small banks in many areas or Mid w est, So uthw est, S o u th e ast, or Northeast. Starting salaries range $18-35,000+. Send resume in strict confidence. ALL FEES PAID d o n HOW ARD Personnel Inc. 500 N. Michigan A ve„ Chicago 60611 (312) 222-1980 6350 LB J Freeway, Dallas, Texas 75240 (214) 233-9012 NYC • NJ • Chicago • Atlanta • S.F. • Dallas NATION'S HEADQUARTERS FOR BANKING PERSONNEL Index to Advertisers • Am erican Bank Directory ........................................ 10 Am erican Express Co. (M oney O rder D iv.) ........ 59 Am erican Express Co. (Travelers Cheques) ........ 53 Animal Fair, In c........................................................... 49 Bacon, A IA Architect & Assoc., Richard L ........... 14 Bank-Aide, In c............................................................. 72 Bank Board Letter ..................................................... 50 Bank Marketing Assoc................................................ 29 Bank of Am erica, San F ra n c is c o ............. 21, 38-39 Bank of the Southwest, Houston ......................... 57 Boatm en’s National Bank, St. Louis ................... 73 Cawthon Building Systems, In c............................... 37 Christm as Club — a C o rp o ra tio n ............................ 27 Com m erce Bank, Kansas C ity ................................ 19 Commercial National Bank, Kansas City, Kan. 67 Deposit Guaranty National Bank, Jackson, Miss. 43 Don Howard Personnel, In c...................................... 72 Douglas Guardian Warehouse C orp......................... 18 Ecom Systems, In c ..................................................... 31 Financial Placem ents ............................................... 65 First Alabama Bank, M o n tg o m e ry.......................... 52 7 First National Bank, Kansas C ity ......................... First National Bank, St. L o u is ................................ 74 First National Bank of Com m erce, New Orleans 9 First Total Systems, In c............................................. 58 BANKERS WANTED Agri-Loan — Mo., la., Ks............. Operations — Wy., Mo., Neb. Sr. Comm’l Loan — Ks., Mo. . . Instl. Loan — Wy., Col................... Comm’l Loan — All areas .......... Cashier— Ks., Mo., Neb............. $ 2 5 ,0 0 0 $ 3 0 ,0 0 0 $ 4 0 ,0 0 0 $ 2 5 ,0 0 0 $ 3 0 ,0 0 0 $ 2 5 ,0 0 0 Many other fine positions available. All in quiries confidential. Salary history and ré sumé requested. TOM HAGAN & ASSOCIATES of KANSAS CITY P.O. Box 12346/2024 Swift North Kansas City, MO 64116 8 1 6 /4 7 4 -6 8 7 4 SERVING THE BANKING INDUSTRY SINCE 1970 MID-CONTINENT BANKER for July, 1 9 8 1 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. C o rre s p o n d e n t B anking D ivision THE BOATMEN'S NATIONAL BANK OF ST. LOUIS 314- 425-3600 Member FDIC E verett K night. Presid ent, G allatin C o u n ty S tate B ank, Ridgway, Illinois. Bom: Rosiclare, II., 1942. Education: Southern Illinois University, 1963. Recently coordinated and led small investor group in purchase of three Illinois banks. “All banks have bricks, mortar, and money. The difference is the people. I’m looking for good people with a positive attitude.” His St. Louis bank: Firstbank. “They go the extra mile to get things done. They’re pros.” First National Bank in St. Louis. The bank that puts Firstperson performance to work for every correspondent customer. Firstperson. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Firstbank. First National Bank r / ^ in St. Louis I I A First Union Bank 510 Locust Street • St. Louis, Missouri 63101 • (314) 342-6967 • Member FDIC
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