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https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis H e re are six reason s why y o u ’re n eve r out-on-a-lim b if your Liberty Correspondent Officer is out of the office. With the staff people pictured here, you’re always in touch with all the benefits of experience, knowledge and courtesy. People on call who know how to answer your c a ll... another reason you can count on Lib e rty ’s C o rre sp o n d e n t B anking D epartm ent. LIBERTY THE BANK OF MID-AMERICA The Liberty National Bank and Trust Company of Oklahoma City • P. O. Box 25848 • 73125 • Phone 405/231-6164 • Member FDIC https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis What’s m ost im portant in a correspondent relationship? Q uality When you evaluate a corre* spondent bank, you look not only for specialized financial and operational expertise, but also for a high quality of service. That’s why throughout the country, bankers rely on The Northern Trust Bank. We offer a complete range of advanced banking programs, supported by a tradition of excellence that is unsurpassed. How can we serve you? At The Northern Trust, all correspondent services are designed with your needs in mind. And these services are constantly being improved to keep pace with the latest technology and regulations. Accelerated Deposit Collection. To help your bank have more cash on hand, The Northern Trust accepts unsorted cash letters, offers late deadlines, and provides immediate availability on major financial centers throughout the country. Bond and Money Market Services. You have complete, accurate market information with just one phone call. FOCUS™ Your bank’s trust investment officers have daily access to the research that our own portfolio managers use, weekly reports that can reduce their paperwork, and periodic seminars with top Northern Trust officers. Special Project Assistance. When you need help with operations analysis, float reduction, marketing, or other important projects, your Northern Trust calling officer and staff are available to assist you. They will put you in contact with other banking specialists who provide information and perspective for your special assignments. For a quality of corre spondent service that’s rare in banking today, contact the calling officer for your area at The Northern Trust Bank, 50 South La Salle Street, Chicago, Illinois 60675. Telephone (312) 630-6000. The NorthernTrust Bank Bring your financial future to us. MID-CONTINENT BANKER for June, 1977 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 3 Convention Calendar Volume 7 3 , No. 7 June, 19 7 7 FEATURES 25 ABA WANTS COMPETITIVE PARITY Reveals consensus at 1977 conventions 27 THE FED MEMBERSHIP PROBLEM: Why is it important to all banks ? Lawrence K. Roos 29 REGULATORY OVERLAP Systematic, reasoned approach needed G eorge A. LeM aistre 37 THE CAPITAL-ADEQUACY DEBATE It’s producing healthy trends in banking G abriel H auge 50 AUTOMATED FINANCIAL ANALYSIS It’s a commercial-lending tool D avid M. Coit CONVENTION REPORTS 64 AMBI 66 MISSOURI 72 KANSAS 76 OKLAHOMA 78 TEXAS 80 ARKANSAS 82 MISSISSIPPI 85 ALABAMA 92 TENNESSEE ON THE COVER: State bankers association officers for 1977-78 DEPARTMENTS 14 THE BANKING SCENE 16 BANKING WORLD 18 SELLING/MARKETING 20 COMMUNITY INVOLVEMENT 22 CORPORATE NEWS STATE NEWS 96 ALABAMA 96 ARKANSAS 96 ILLINOIS 98 INDIANA 98 KANSAS 99 KENTUCKY 99 LOUISIANA 99 MISSISSIPPI 100 MISSOURI 102 TEXAS 100 NEW MEXICO too OKLAHOMA 101 TENNESSEE illlllilllllllllllllllllllllllllllllllllllllllllllllllllllllll Editors Ralph B. Cox Editor & Publisher Lawrence W. Colbert Assistant to the Publisher Rosemary McKelvey Managing Editor Jim Fabian Associate Editor Daniel H. Clark Assistant Editor Advertising Offices St. Louis, Mo., 408 Olive, 63102, Tel. 314/ 421-5445; Ralph B. Cox, Publisher; Mar garet Holz, Advertising Production Mgr. Milwaukee, Wis., 161 W. Wisconsin Ave., 53203, Tel. 414/276-3432; Torben Soren sen, Advertising Representative. 4 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis MID-CONTINENT BANKER (publication No. 346 360) is published 13 times an nually (two issues in May) by Commerce Publishing Co. at 1201-05 Bluff, Fulton, Mo. 65251. Editorial, executive and busi ness offices, 408 Olive, St. Louis, Mo. 63102. Printed by The Ovid Bell Press, Inc., Fulton, Mo. Second-class postage paid at Fulton, Mo. Subscription rates: Three years $21; two years $16; one year $10. Single copies, $1.50 each. Commerce Publications: American Agent & Broker, Club-Management, Decor, Life Insurance Selling, Mid-Continent Banker, Mid-Western Banker, The Bank Board Letter and Program. Donald H. Clark, chairman; Wesley H. Clark, president; Johnson Poor, executive vice president and secretary; Ralph B. Cox, first vice president and treasurer; Bernard A. Beggan, William M. Humberg, James T. Poor and Don J. Robertson, vice presidents; Lawrence W. Colbert, assistant vice presi dent. June 15-16: Indiana Bankers Association An nual Convention, French Lick, French LickSheraton. June 16-17: Robert Morris Associates Foreign Credit Analysis Workshop, Chicago, Hyatt Regency O’Hare. June 20-22: National Association of Bank Women Lake/Midwest/North Central Re gional Conference, Indianapolis, Indian apolis Marriott Inn. June 22-24: Bank Administration Institute Current Bank Tax Problems Seminar, Den ver. June 27-July 1: Bank Administration Institute Bank Auditing, Intro I Short Course, Evans ton, 111., Northwestern University. July 10-13: ABA I&PD Rise & Insurance Management in Banking Seminar, Arling ton, Va., Arlington Hyatt House. July 10-22: ABA School for International Banking, Boulder, Colo. July 17-23: ABA Operations/Automation Div. Business of Banking School, Ithaca, N. Y., Cornell University. July 24-29: ABA National School of Bank Card Management, Evanston, 111., North western University. July 28-30: ABA National Governmental Af fairs Conference, Washington, D. C., Wash ington Hilton. July 31-Aug. 12: Consumer Bankers Associa tion Graduate School of Consumer Banking, Charlottesville, Va. Aug. 7-12: ABA National School of Real Es tate Finance, Columbus, O., Ohio State Uni versity. Aug. 13-19: Bank Marketing Association Bank Management School for Marketing Man agers, Madison, Wis., University of Wis consin. Aug. 14-27: Central States Conference^ Gradu ate School of Banking, Madison, Wis., Uni versity of Wisconsin. Aug. 15-26: ABA National Trust School/National Graduate Trust School, Evanston, 111., Northwestern University. Sept. 8-9: Robert Morris Associates Commer cial Loan Training Programs: Content and Methods Workshop, Chicago, Continental Sept. 11-13: Bank Marketing Association “Hot Topic” Seminar, Atlanta, OMNI Internation al Hotel. Sept. 11-14: ABA Bank Card Convention, At lanta. Peachtree Plaza Hotel. Sept. 11-16: Robert Morris Associates Loan Management Seminar, Bloomington, Ind., Indiana University. Sept. 12-15: National Association of Bank Women Convention, Atlanta, Atlanta Hilton. Sept. 18-21: ABA National Personnel Confer ence, Atlanta, Hyatt Regency. Sept. 22-23: Robert Morris Associates Value and Credit Assessment in Real Estate Lend ing Workshop, San Francisco, St. Francis Hotel. Sept. 25-27: ABA Secondary Market Work shop, Chicago, Hyatt Regency O’Hare. Sept. 25-27: Bank Marketing Association Of ficer Sales Call Training and Train the Trainer Seminar, Columbus, O., Columbus Hilton Inn. Sept. 28-30: ABA Southern Regional Opera tions and Automation Workshop, Atlanta, Hyatt Regency. Oct. 3-4: Robert Morris Associates Loan Qual ity Control Workshop, San Francisco, Miyako. Oct. 15-19: ABA Convention, Houston. Oct. 23-27: Consumer Bankers Association Convention, Phoenix, Arizona-Biltmore. Oct. 26-28: ABA Midwestern Regional Opera tions and Automation Workshop, Chicago, Hyatt Regency O’Hare. Oct. 30-Nov. 1: ABA International Foreign Exchange Conference, New York City, Wal dorf Astoria. Oct. 30-Nov. 2: Robert Morris Associates An nual Fall Conference, New York City, New York Hilton. Oct. 30-Nov. 2: Bank Marketing Association Convention, Honolulu, Hawaii, Hilton Ha waiian Village. Nov. 2-4: Association of Bank Holding Com panies Fall Meeting, Boca Raton, Fla., Boca Raton Hotel. Nov. 6-9: Bank Administration Institute Con vention, Houston, Hyatt Regency. Nov. 6-17: ABA National Commercial Lending School, Norman, Okla., University of Okla homa. Nov. 13-16: ABA National Agricultural Bank ers Conference, Kansas City. MID-CONTINENT BANKER for June, 1977 You’re looking for extra profits Our cash letter analysis can uncover ’em. It’s surprising how much potential profit is buried under slow paper. That’s why we’ve developed an effective action program to help you get things moving. Our program includes computerized cash letter analysis ... plus practical methods for improving proof operations and check collection. Start us digging for those profits—call 314-425-2404. W e’re w ith you. M = ^nI IrhJT a Hn ITI iI Li m = 1 w I hbb Bnnc Mercantile Trust Company N.A. • (314) 425-2404 • St. Louis, Mo. • Member F.D.I.C. MID-CONTINENT BANKER for June, 1977 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis M anufacturers Hanover Cash Letter Express Services speed up your cash flow. advise you of date and time of receipt, confirm totals and major return items of the previous day. Funds available faster. Manufacturers Hanover has its own ways to convert intransit items into cash—fast. Just as we do it for our selves, we do it for bur correspondents. A id we do it all— sorting, bundling, collecting and crediting. The Early Bird delivers. To beat traffic, we use helicopters to speed your checks from the airport to our processing center. At our expense. This gives you more time to meet the deadline for converting late items into “good” funds. Control over funds. MHT does the work, but you’re in full control of your funds at all times. We provide daily verifications via bank wire or phone, Low Costs. Because we com pute our Earnings Credit Rate differ ently from many other New York City banks, we keep balance require ments down. Thus your net costs are unusually low for superior service. For more details and our latest avail ability schedule, contact our Cash Letter specialist, Ronald R. Pabian, Manufacturers Hanover, 350 Park Avenue, New York, MY. 10022. (212) 350-4107. MANUFACTURERS HANOVER Member FD1C 6 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis MID-CONTINENT BANKER for June, 1977 B J V fffnnnnfffllplllstos IPfIlll ■■■ V f IffIlilllllillllii« f f f ff il 11Ififtil i I“sff P■ Illllf III1 I I If f i l l fill ifllffllll flllfflfl f lf li ll ll H I f I If /lllllf'i illlllfII f m j f I S I f I I 1 I f p P f i f f f f i i f f i | | | f Within Bank of Oklahoma Tower... l « » . * * f f ! / I I f l l i f l l 1 H I i ¡ 1 I f l f l l ! I I ! I t 7 f l f l l l l l l i l i l l i l i i l I l l n H I I I I I I I I I I I 1 l® if fi l1 l 1 i 1 l I f 1 i I l I f i l i M m ' t t l U l L I llltlll Left to righ t: Charles Rice, Paul Mindeman, Lee Daniel resources to provide you with comprehensive trust services. For a direct connection to the total trust services of Bank of Oklahoma, call one of our Correspondent Bankers. Just tell us what you or your customers need. Complete corporate trust and paying-agent services? Quality management of employee pension, profit-sharing, or thrift plans? Retirement plans for the self-employed? Personal trust services? Our Trust Division does it all. Expand your capabilities by tapping ours. Call our Correspondent Banking Department. It makes good business sense! Correspondent Bankers Charles Rice, Department Manager 588-6254 Marvin Bray 588-6619 Lee Daniel 588-6334 Bill Hellen 588-6620 Phillip Hoot 588-6617 BANK OF OKLAHOMA P.O. Box 2300 / Tulsa, Oklahoma 74192 Member F.D.I.C. MID-CONTINENT BANKER for June, 1977 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 7 M l * https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Ifyousellyourcustomers anordinarybrandoftravelers cheques,besuretotell diemnot tolosethemonaweekend. O r on a holiday. O r even at night. W hy? Because ordinary travelers cheques have ordinary refund systems. W h ich are only open during normal banking hours, Monday through Friday. If a customer loses ordinary travelers cheques on a weekend, he could be out o f funds for quite some time. And that’s enough to ruin a per fectly good vacation. Your customer deserves better than this. He deserves Am erican Express® Travelers Cheques. W ith A m erican Express, your cus tomers can get an Emergency Refund" 24 hours a day, 365 days a year, for up to $100 at Holiday Inns across America and Canada. Our Emergency Refund system alone is enough to rescue a vacation from disaster. But it’s just one of the reasons why A m erican Express is the world’s number one brand of travelers cheque. Here are a few more. 1. Your customers can get full refunds during normal business hours. Usually on the same day. In addition to Emergency Refunds at odd hours. 2. Am erican Express Travelers Cheques are good at thousands more ho tels, motels, restaurants and gas stations across Am erica than any other brand. 3. Only A m erican Express Travelers Cheques are supported by the world’s largest network of travel offices. Helpful places around the world where your customers can go with a problem. Good customer relations are price less. You can protect them with the world’s number one \ brand of travelers cheques: Am erican Express. H BH H B American ExpressTravelers Cheques https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Aninvestmentopportunity at a great rate. Now earn 8V4% interest on Capital Notes issued by Com m erce Banks. □ Notes are issued in $ 5 ,0 0 0 denominations. □ Ten year maturity, interest payable semi-annually (June 1 and December 1) □ Notes are registered and transferable. F o r more information on an investment opportunity that is proving especially attractive to banks and bank trust departments, call Linda Copeland, at 816/234-2668. Series A Capital Notes are issued by the following Commerce Banks: Barry County, B lu e Hills, Bolivar, B onne Terre, Brunsw ick, Festus, Hannibal, Joplin, Kahoka, Kirkwood, Lebanon, Moberly, Poplar Blujf, St. Charles, Springfield, Tipton, University City and by Lexington B a n k & Trust Co. Copies of the Offering Circular and Subscription Agreement may be obtained from the individual banks or through the telephone number listed above. This advertisement is neither an offer to sell nor a solicitation of an offer to buy. The offer is made only by the Offering Circular. These notes are not deposits and therefore are not insured by the Federal Deposit Insurance Corporation and are subordinate to the claims of depositors and other creditors. What can we do for you? (§) Commerce Banks MEMBERS FDIC 10 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis MID-CONTINENT BANKER for June, 19 Another High Performance Securities Service I If you think Central Securities Depositories aren’t profitable for your bank... Think Again. Central electronic securities depositories allow your bank to do certificateless securities processing. That means fewer fails, fewer lost certificates, fewer thefts, fewer DK’s and faster settlements. It all adds up to lower costs and higher profits. Then what’s the problem? Why aren’t more banks participating in the depositories? Well, there are many reasons. For example, many banks haven’t been fully informed as to the advantages of using depositories. Also, there’s a considerable up-front investment in manpower and equipment before a bank can have a direct hook-up to a depository. We’ve given a lot of thought to how we could help our correspondents in this area, and we’ve developed a solution that will be very beneficial. Let Chase Be Your Depository Agent. Because of our vast experience in dealing with the Depository Trust Company for corporate securities, and the Federal Book Entry System for government securities, we can do it all for you. We can protect you from the potential pitfalls that might exist for banks that are unfamiliar with these systems. You’ll have all the benefits that depositories offer... with less risk and at a lower cost. You’ll pay just a fraction of what it would cost to do a direct hook-up yourself. We’ll Help You Make the Conversion. To convert your bank’s securities into depositories, a complete reconciliation of your securities is needed. Chase experts will work side-by-side with your staff to insure a smooth, carefully controlled conversion. MID-CONTINENT BANKER for June, 197 7 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis You’re Always in Complete Control. We’ll quickly and accurately process all your transaction instructions with the depositories. To keep you in control, we’re able to receive your instructions and send advices by any transmittal system you wish to use. We’re flexible. So flexible, in fact, that we’re able to provide you with special accounting reports and valuations few banks can offer. You Get Total Accounting Support. Keeping track of your deposited securities, requires some special accounting systems. That’s why we developed a computerized system to keep your securities position reconciled on a daily basis. We keep track of all your items, all the time they’re on deposit. Call Us. At (212) 552-3192 or send in the coupon below. Your Chase Relationship Manager will tell you more about how our High Performance Securities Service can help make depositories more profitable for you. And he or she can send you ourf = . comprehensive Update report on the history, evolution, features and benefits of depositories. Chase Relationship Manager Correspondent Banking Division P.O. Box 217 Bowling Green Station New York, New York 10004 o Please contact me. □ I want the entire story on securities depositories. Please send me your Chase UPDATE on the subject: Name____________________________ Title_________ Bank__________________________________________ Street_________________________________________ City__________________State__________________ Zip. Phone (___)__________________________________________ _ Give your bank the Chase Advantagec MEMBER FDIC ©Chase Manhattan Bank, N.A. 1977 (hink, also, about a m ajor Regional Bank! Many people, when they “think Mississippi,” have in mind one of our State’s beautiful antebellum homes, or fields of cotton, or a civil war battlefield, the colorful Natchez Trace or some other historic or scenic feature. But, there are many other things to think about in Mississippi today. An unemployment rate well below the national average. Over $200 million invested in new and expandedlndustry in 1976, providing almost 10,000 new jobs. And, Mississippi’s largest commercial bank - now reporting over $1 billion in total assets - with the capability of handling virtually any need you or your customers may have for special services in Mississippi. A call to the Regional Bank Officer serving your area will bring you the kind of prompt and efficient service you expect from a major regional bank. The Correspondent Department of Mississippi s Regional Bank Barney H. Jacks Senior Vice President and Manager DEPOSIT GUARANTY NATIONAL RANKMember F D.l C. Grew with Us Bill Lloyd Northwest Mississippi & Arkansas Joel Varner Southeast Mississippi & Southwest Alabama Jim Crawford Southwest Mississippi & Louisiana Ed Keeton Northeast Mississippi, West Tennessee & Northwest Alabama In Mississippi call Toll Free WATS Number 1-800-222-7640 Jackson • Centreville • Greenville Greenwood • McComb • Mont ¡cello Natchez • Newhebron • and offices in Clinton and Pearl. I2 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis MID-CONTINENT BANKER for June, 1977 Manufacturers Hanover Commercial Corporation. A Capital Source for Correspondents. If you're a Manufacturers Hanover correspondent and you've been forced to turn away or lose lucrative receivables financing business, we have a plan that can enable you to compete in this highly specialized area. Use Manufacturers Hanover Commercial C o r poration as your commercial financing arm. With M HCC, you can participate up to 50% in all referrals as well as retain checking accounts and other peripheral business. You'll be able to assist in mergers, acquisitions, buy-outs and Spin-offs. And M H CC can also help you with difficult to handle loans, i.e., no clean-ups, highly leveraged situations or those with high peak seasonal needs. Manufacturers Hanover Commercial Corporation requires no compensating balances and you won't have to worry about exceeding your loan limits, or about your customers using competitor's services. W ere already a capital source for a number of correspondents, and we'd be glad to talk to you about becoming yours. For more information contact your National Division representative or write to us at the address below. We ll have some capital ideas for you. MANUFACTURERS HANOVER COMMERCIAL CORPORATION It’s a capital source. H eadquarters: 1211 Avenue of the Americas, New York, N.Y. 10036 Contact: Merwin Wallace, V.P. (212) 575-7472 or F.X. Basile, Sr. V.P. (212) 575-7444 Serv ice O ffices: 445 South Figueroa Street Jefferson First Union Plaza, Suite 1450 Los Angeles, Calif. 90017 Charlotte, N.C. 28282 Contact: Jim Morrison, V.P. (213) 489-4910 Contact: Michael Walker, V.P. (704) 332-2689 5775-B Glenridge Drive, N.E., Suite 340, Atlanta, Ga. 30328 Contact: William Wilmot, V.P. (404) 255-5612 MID-CONTINENT BANKER for June, 1977 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 13 The Banking Scene By Dr. Lewis E. Davids Hill Professor of Bank Management, University of Missouri, Columbia Who Is the Competition? AUL NADLER, the well known and respected Rutgers University professor/commentator on banking and economics, once remarked before a con vention of bankers, “Only one person who is present really believes in com petition: Me! “But I have been granted tenure at my university. Although you bankers,” Dr. Nadler continued, “may openly support the concept of competition for others, you generally can find a good rationalization why competition in your particular province isn’t in the public interest.” Dr. Nadler was correct. Most of us would prefer not to have an immediate and close competitor— such as a bank, S&L or mutual savings bank—across the street. Having no sig nificant competition would permit us to take things a little easier. That way, the trauma of learning that the com petition is showing a higher profit or is getting a larger market share would not arise. A few hardy souls in the old Macy’s and Gimbel’s tradition welcome an honorable competitor. These hardy ones are, in general, high-performing indi viduals who get a thrill from perform ing in a manner superior to the compe tition. On the other side of the coin, how ever, is the large number of individuals or institutions that have that high-per forming individual or bank as a com petitor; they die just a bit each time the data or other intelligence indicates that the competition has outperformed them. Philosophically, as our society seems to move more and more toward egali tarianism, there is the curious and sad acceptance of mediocrity—while we don’t particularly like “underachievers,” we really don’t value high performers, either. Thus, we accept the concepts of progressive taxation and other leveling techniques to arrive at a distorted sense of social justice and naturally lower productivity. P 14 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Why not take a brief moment and list the names and relative rankings of your competitors? I don’t know exactly what you wrote, but there is a good probability that it was: ( 1 ) nearby commercial banks; (2) S&Ls in the community; (3 ) mutual savings banks (for those located in the Northeast); (4 ) credit unions; and, perhaps, (5 ) a production credit association. I ’m certain that your list probably is correct as you might perceive your own competition now, but an extrapola tion of these depository-type financial institutions can lead to a different rank ing: Credit unions at present are ex periencing a much more rapid growth rate than mutual savings banks, for cards/ automobile financing, insurance); Household Finance Corp. (installment loans, personal loans/credit cards); American Express (credit cards, money machines, a wide range of loans and leasing); investment funds (E F T and loans); General Motors Acceptance Corp. (installment loans/leasing) or almost any firm whose charter bypasses the ultra-vires restraint by including a phrase such as “and other legal activi ties decided on by the board of di rectors.” These non-depository institutions now have a few disadvantages in competing with banks, but the trends in economics and politics are erasing those disad vantages. Banks now realistically view the termination of Regulation Q and the "A few hardy souls in the old Macy's and Gimbel's tradition welcome an honorable competitor. These hardy ones are, in gen eral, high-performing individuals who get a thrill from perform ing in a manner superior to the competition." example. However, federal chartering of mutual savings banks could stim ulate a dramatic change and spread of those institutions. Some students of banking and fi nance might differ in their perceptions when ranking your bank’s competition. They would hold that the potential for bank competition— and for other de pository institutions—is more likely to come and develop from non-depository institutions! These competitors now, or could in the future, compete in major market segments now believed to be in the purview of depository type financial institutions. These non-depository firms include, but are not limited to, such giants as American Telephone & Tele graph ( E F T ) ; Sears, Roebuck and its finance and insurance s u b s id ia r ie s (credit cards/appliance financing, POS, small loans); Exxon Corp. (credit payment of interest on demand and public funds as the light at the end of the tunnel. These competitors can and do borrow at the lower interest rates charged the commercial market, a rate that probably is below 5%. Non-depository “financial” institu tions also have much less governmental regulation than depository financial in stitutions. They have much greater flexibility and can move in and out of financing opportunities as their interest and opportunities dictate. The list of the relative advantages and disadvantages of non-depository fi nancial institutions competing with de pository financial institutions could be expanded and will be the subject of one of my future columns. For our pur poses here, however, it is adequate to state this perception: There are a suf(C ontinued on p ag e 34) MID-CONTINENT BANKER for June, 1977 We ca n solve your problem ! Here’s how... We can help you find the solution to that problem lying on your desk right now. Over the long haul, we can help you grow, a little at a time, or a lot. Let’s get together! Account Services: Cash letters. Wire transfers. Coin and currency. Collections. Loan Administration: Commercial, agricultural, and real estate overlines. Bank loan counseling. Data Processing: “ On-line” and “ Batch:’ Checking. Savings. Certificates of deposit. Installment and commercial loans. General ledger. Automated clearing house. Automatic teller machines. Payroll. Investment: U.S. Gov’t’s. Federal agencies. Munic ipals. Federal funds. Commercial paper. Computer ized bond portfolio accounting. Pricing and counseling. Securities safekeeping. Trust: Public fund custodial accounts. Personal and corporate trusts. Bank Cards: Master Charge. Visa. Leasing: Direct. Or, participating. International Banking: Worldwide correspondent network. Letters of credit. Foreign collections. Currency exchange. E.L. Burch Vice President Correspondent Bank Division Dick Muir Assistant Vice President lowa-Nebraska Jack Beets Vice President Kansas paie Parker Assistant Cashier Colorado-KansasNebraska Bob Widlund Assistant Vice President Oklahoma Ben Adams Vice President Missouri Duhcan Kincheloe Assistant Vice President Texas-Arkansas Dave Van Aken Assistant Vice President Kansas Phil Straight Vice President Northern MissouriNebraska George Crews Assistant Vice President Kansas City Metro Steve Blackburn Assistant Vice President Kansas UNITED MISSOURI BAN K OF KAN SAS CITY, N .A . United we grow. Ibgether. 10th and Grand, Kansas City, Mo. 816/556-7000 MID-CONTINENT BANKER for June, 1977 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Member FDIC 15 B A N K IN G W O R L D PERKINS SMITH • John H. Perkins, president, Con tinental Illinois National, Chicago, has been nominated to be ABA president elect for 1977-78. Thomas R. Smith, president, Fidelity Brenton Bank, Mar shalltown, la., was nominated to be ABA treasurer. The nominations, to be presented to the ABA’s annual conven tion in October, were made by the as sociation’s Governing Council when it was in session late in April. They were the first under a new procedure in which the council serves as the nom inating committee. The Governing Council is made up of representatives of banking units in all 50 states. Mr. Perkins had been opposed for the presi dent-elect’s post by William J. Cope land, vice chairman, Pittsburgh Na tional. Mr. Smith’s opponent was Her mann Moyse, president, City National, Baton Rouge. • Robert Strickland has been named CEO at Trust Co. of Georgia, Atlanta, and James B. Williams has been elect ed vice chairman. Mr. Strickland, presi dent of the HC, took over the CEO ’s duties from A. H. Sterne, who remains HC chairman. Mr. Strickland continues as chairman of the bank, the lead bank in the Trust Co. statewide system of banks. Mr. Williams continues as presi dent and CEO, Trust Co. of Georgia Associates, a subsidiary HC that man ages Trust Co.’s controlling interests in six affiliated banks. This transfer of top-executive responsibilities was made in anticipation of Mr. Sterne’s retire ment as an active officer of the com pany early next year. • Joseph L. McElroy has joined Manufacturers Hanover Trust, New York City, as head of its trust division and also as executive vice president and a member of the general administrative board, the bank’s senior policymaking group. Mr. McElroy had been execu tive vice president in charge of Bank https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis McELROY HALDEMAN McLEAN FAZIO of New York’s trust division. He holds a law degree from the New York Law School, is a graduate of the Stonier Graduate School of Banking, Rutgers University, New Brunswick, N. J., and completed the H a rv a rd B u s in e s s School’s advanced management pro gram. At Manufacturers Hanover, he replaced C. Roderick O’Neil, who re signed to become chairman of the fi nance committee and a director of the Travelers Insurance Co. • J. W. McLean, chairman, Liberty National, Oklahoma City, has been named a vice chairman of Allied Bank International, New York City. Allied, founded in 1968, is owned by 18 U. S. banks, including Liberty National, and has aggregate assets of more than $30 billion. • Philip L. Fazio has been elected a commercial banking officer at Harris Trust, Chicago. He is in the bank’s Midwest group and travels in Kentucky and Missouri. Mr. Fazio joined Harris Bank in 1973. • Earl N. Haldeman III, assistant vice president in the agri-business de partment at First National, St. Louis, has been selected as an “Outstanding Young Man of America” for 1977. The award is presented annually to men be tween the ages of 21 and 36 by Out standing Young Men of America, a Montgomery, Ala., organization formed in 1965 to recognize individuals for WILLIAMS STRICKLAND their civic contributions and professional achievements. Mr. Haldeman was cited for his support of the banking industry through serving as a part-time faculty member of Missouri Western State Col lege, St. Joseph, Mo., where he taught in the agribusiness and business depart ments for two years. He also served as chairman of the education committee of the St. Joseph chapter of AIB, during which time he developed a curriculum leading to a BA in banking and finance at Missouri Western. • Eirvin B. Knox has been named vice president and general manager of Continental Illinois National of Chi cago’s Los Angeles-based international banking subsidiary, Continental Bank International (Pacific). Mr. Knox joined the bank in 1973. Carroll M. Rickard, former general manager of Continental Bank International (Pacific), has been relocated to the bank’s Chicago head quarters, where he heads the Latin America-Asia/Pacific group in the new multinational banking services depart ment. • Alexander P. Orr Jr. retired May 1 from the Federal Reserve, St. Louis, where he had been assistant vice presi dent, bank relations and public infor mation department. He had spent 45 years with the bank and, since 1968, has represented it in southern Illinois and southwestern Indiana. Mr. Orr also had traveled, as a bank representative, in most parts of Missouri. Lawrence K. Roos (r.), pres., St. Louis Fed, visits w ith M r. and Mrs. A le xa n d e r P. O rr Jr. a t reception a t bank on last d a y o f M r. Orr's career a t bank, which he joined in 1931. WHERE MONEY MEETS can be in the solid surround ings of tradition or in an atmosphere of contemporary flair, but the feeling must be the same, the feeling that things of great importance take place there. We know the feeling at Arrow Business Services. Our Design Department can give it to you in your meeting rooms, your lobbies, throughout your facility. They and you can choose from 16,000 square feet of custom showroom and 25,000 square feet of active inventory right behind it. Furniture. Decor pieces and accessories. People and paper flow systems. Even supplies. Arrow also knows that even where money meets the surroundings shouldn't cost too 3INESS SERVICES, INC. 54RROI4* m u c h m o n e y . W e h a v e a f e e lin g J 1 _ .... meet your needs. Call us. W e C an an affiliate o f M em phis Bank & Trust 3 0 5 0 M illbranch • Mem phis, Tennessee 38116 m i 396-9861 WÜ MID-CONTINENT BANKER for June, 1 977 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 7 Selling /Marketing It's a Record: Unusual Annual Report Has Stockholders Listening Pictured a t BANCLUB's fifth annu al convention a re (I. to r.): Henry C. M cCall, pres., Financial Institution Services, N ashville, corporate adm inistrator fo r BANCLUB; Clinton O . Holdbrooks, e.v.p. & cash., Peoples Bank, Pell City, A la ., and Robert D. Anderson, a .v .p ., A nthony W a y n e Bank, Fort W ay n e , In d., both o f w hom w e re elected to BANCLUB council; E. Reese Davis, pres., County Bank, Santa Cruz, C alif., and D onald F. H ow ie, v.p., Piedmont Bank, Davidson, N.C., both o f whom are ex officio council members. Retail Banking: Sales Programs Discussed A t BANCLUB Convention Rap sessions on international opera tions, nonbank service-package bene fits and employee-incentive programs were a highlight of the recent fifth an nual convention of the BANCLUB As sociation in San Antonio, Tex. The lat ter is a national organization of about 1,100 U. S. banks with a common de nominator of a retail banking package. Conventioneers heard such topics as employee training, sales and advertis ing and package values designed to at tract new accounts, improve bank earn ings from the DDA base and assure better account retention. One general session was led pri marily by representatives of Financial Institution Services, Inc. (F IS I) , Nash ville, BANCLUB’s corporate adminis trator. This session included presenta tions by Lee Ault II I and William Brian, members of Telecredit’s staff, Los Angeles, who discussed the newest BANCLUB feature, CHECASH, which is a coast-to-coast personal check-cash ing service among BANCLUB member banks throughout the country. During the meeting, the following were elected to the BANCLUB coun cil: Robert D. Anderson, vice presi dent, Anthony Wayne Bank, Fort Wayne, Ind.; Clinton O. Holdbrooks, president, Peoples Bank, Pell City, Ala.; Bill G. Looper, F IS I executive vice president, and Travis R. Anderson and A. E. Pleming, F IS I vice presidents. E. Reese Davis, president, County Bank, Santa Cruz, Calif., and Donald Howie, vice president, Piedmont Bank, 18 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Davidson, N. C., will serve with the elected council as ex officio council members. The council’s primary re sponsibility is to be a liaison between bank members and F ISI. Bunny Day: Easter Rabbit Gets Help In Bank's Egg Contest For the fourth year in a row, First Bank of Park Forest South, 111., has given the Easter Bunny a helping hand in the form of an egg-decorating con test for local children. Area youngsters were invited to bring decorated eggs to the bank for judging by a panel of area residents. Winners in each age group received savings ac counts at the bank, and, of course, the Easter Bunny was on hand to “egg” contestants on! A t rear, Easter Bunny, Vicki N ym an, v.p., and Dennis N ow aczyk, pres., First Bank o f Park Forest South, III., join winners o f bank's fourth a nnu al Easter egg-decorating contest. A rea children w ere invited to bring decorated eggs to bank fo r judging, w ith winners receiving free savings accounts. St. Joseph Valley Bank, Elkhart, Ind., reported a record year for 1976, and to report the news to shareholders, a “record” format was used. The re port that had stockholders “listening” was printed as what appears to be a standard long-play record album! The album’s cover features a red and blue neon sign flashing the mes sage, “1976, a Record Year,” against a black background, while the bank’s identification and the phrase, “1976 An nual Report,” is printed in white at the top and bottom of the cover, respec tively. Inside the album cover is a message to shareholders from Jon Armstrong, bank chairman, and Terrence Brennan, president, while financial figures are found in the album’s sleeve. Pages of the report bear the image of phono graph records, carrying out the theme. The report is shrink wrapped to look like the real thing, and, for mailing, address labels simply are attached to the shrink wrap. Bank officials are pleased with the effect of the report. According to a St. Joseph Valley spokesman, “We feel that, in addition to the report being unique, the ‘album’ also will be a very useful new business tool.” Oldies: Collection of Memorabilia Is 'H it' Lobby Attraction Representatives of four Chicagoarea banks— Cary State, Palatine Na tional, Suburban National of Elk Grove Village and Suburban National of Pala tine— are in agreement about the popu larity of things past. A recent display of antiques in the banks’ lobbies “drew a lot of attention” from area residents. Items featured in the collections in cluded dolls, convention badges, clocks and beer steins. The showings, which were donated by Lyle Curran & Asso ciates, Chicago, were rotated every three weeks, enabling each bank to vary its displays. “Old campaign buttons and ribbons seemed to be one of the most popular displays,” says a bank spokesman. “Viewers would gather around the col lection and exchange recollections about numerous political candidates the dis play represented— such as H e r b e r t Hoover, Franklin D. Roosevelt and Wendell Willkie.” MID-CONTINENT BANKER for June, 1977 ± JLarland bank forms can cure all your internal aches and pains. They are simple, ef ficient and inexpensive, and are designed to keep the internal business at your bank flowing smoothly. Harland internal forms are available in several stock styles and colors, or can be custom designed to meet your specific needs. They are economical to buy and use, and are https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis printed and shipped to you in a minimum amount of time. And they are all right here in the Harland Bank Forms brochure. To get your brochure, simply write Harland or talk to your Harland representative. Hell show you how to save money and time with Harland a a s t q # y internal forms. / M r l / v l / l / w l / P O S T O FFIC E B O X 105250ATLANTA, G EO RG IA3 0 3 4 8 'Paperhangers,' Beware: Free Check-Cashing Guides Distributed to Merchants To Help Reduce Forgeries Passing bad checks has become al most an epidemic in this country and is posing a problem to banks and mer chants alike. In an effort to help alle viate this situation in its area, Palatine (111.) National—in cooperation with the Palatine Chamber of Commerce and the local police department—dis tributed free check-cashing guides to all merchants. According to the bank’s chairman, Gerald F . Fitzgerald, this guide can help even the newest clerk quickly de termine what to look for in bad checks. He emphasizes how important it is to eliminate this problem so both mer chants and customers are able to con duct business with less inconvenience and wasted time. The l l x l 7-inch guide lists, by num ber, the 12 key points to examine when cashing checks. Along with these 12 points are illustrated the front and back of a sample check, with each part of them numbered to coincide with the 12 points. Thus, anyone reading the guide can associate each point with its location on the check. For instance, point No. 1 is: Make certain the check is encoded with rout ing numbers. Then, the figure No. 1 is shown on the check illustration point ing to the routing number. In addition, various types of checks frequently presented are pictured with special tips on what to look for in handling them. Four ways to endorse checks and what each endorsement 20 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Community Cited for Brotherhood Involvement means to the merchant also are ex plained. Mr. Fitzgerald knows that it’s less costly to spot a bad check before it’s passed and hopes these check-cashing guides will cut down on the number of bad checks being passed in Palatine. Further information on these check cashing guides may be obtained by writing: Guardian Publications, P. O. Box 611377, Miami, F L 33161. New Entrant: Insured C redit Services Boosts Energy Savings Insured Credit Services, Inc. (IC S ), Chicago, has joined the ranks of the nation’s financial institutions that are taking steps to boost energy saving by consumers. ICS is encouraging homeimprovement loans for energy-saving projects. An ICS spokesman says that the firm has introduced the following three-part program: (1 ) It will expand availability of credit insurance to qualified financial institutions currently extending credit for energy-conservation projects; ( 2 ) it will make available its expertise and knowledge to financial institutions not presently active in the property-im provement-loan field for the purpose of developing consumer-oriented energyconservation lending programs; and (3 ) ICS will implement industry-wide con tact with the nation’s leading power companies to assist in coordination and development of loan programs between utilities and financial institutions. ICS is a subsidiary of Old Republic International Corp., a multi-line insur ance HC. Presenting the 1977 Brotherhood A w a rd o f the Tulsa C hapter o f the N a t'l Conf. o f Chris tians and Jews to Eugene L. Sw earingen (I.), ch., Bank o f O klaho m a, Tulsa, is Tulsa M a yo r Robert J. LaFortune. In honoring M r. S w ear ingen, M r. LaFortune said th a t "despite his success as a business leader, educator, author and consultant, M r. S w earingen has continued to m aintain a close association w ith youth, civic affairs and the com m unity." In Kentucky: 1976 Tax Reform A ct Is Bank Seminar Topic The “1976 Tax Reform Act and Its Impact” was the title and subject of a half-day seminar sponsored by First Se curity National, Lexington, Ky., and was presented to members of the Ken tucky Bar Association who practice in the Fifth Appellate District. A number of topics were discussed during the event, including: “Fiduciary Responsibility Under the Tax Reform Act”; “Generation-Skipping Transfers”; “Carry-Over Basis”; “Martial Deduc tion” and “Will and Trust Drafting After the Tax Reform Act.” On hand for the seminar as guest speakers were Austin Fleming, counsel, Northern Trust, Chicago, and Jack R. Cunningham, vice president and trust officer, host bank. Bank Assists Blood Institute Red Cross Cooperates: Disaster/Youth Safety Is Unique Lobby Display “Disaster and Youth Safety” was the title of a lobby display held at Chicago City Bank’s Englewood Shopping Con course Office in conjunction with the American Red Cross. Emergency clothing kits and disaster equipment were displayed, illustrating the Red Cross’ commitment to aiding disaster victims. Books and pamphlets on first aid and emergency care were available. The exhibit was held during regular banking hours. M ike Barnes, financial planning off., Liberty N a t'l, O klaho m a City, registers to give blood to the O klaho m a Blood Institute. In a tw o -d a y period, 206 bank employees donated 157 units o f w h ole blood to help the institute reduce its 2,000-u nit deficit, helping lessen the am ount o f blood th a t must be im ported into the O kla homa City a re a . MID-CONTINENT BANKER for June, 1977 "We turned our money order program over to Travelers Express:' Mr. Dewey Moore, Vice President-Cashier, First National Bank of Atlanta specialist like Travelers Express run your money order business. It not only saves time and paperwork, but there are some special prof it- enhancing features built right into the program. But don’t just take our word for it. Listen to First National of Atlanta! 1 IS lii 3 “ Now all we do is issue the money orders.. .Travelers Express does the rest’.’ As more and more banks are discovering, it’s far more profitable to let an experienced money order 11.- Does First National of Atlanta know something about you ought to know? Call us toll-free at Q00 -b 21 -A b l 2> In Texas call collect 214-742-1605 Travelers Express ■■ - ~ ~ ~ . * ■ n T w . . r— . _i . _ _ t ™ 410 Davis Bldg., 1309 Main Street, DallasTexas75202 A Greyhound Subsidiary 1977, Travelers Express Company, Inc.« MID-CONTINENT BANKER for June, 1977 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 21 • Douglas-Guardian W a re h o u se Corp. Douglas Scherer has been elected president and CEO, Douglas-Guardian Warehouse Corp. and Douglas Public Service Corp., both based in New Or leans. John B. Cressend has been named vice president and general man ager of the former. Thomas E. Moulin has retired as vice president of both companies, while Neil A. Brynning has retired as vice president and general manager of Douglas-Guardian. CRESSEND SCHERER • Bank Building Corp. This St. Louis-based firm and Westmor Corp., Los Angeles, have reached an agree ment in principle for the former to ac quire Marshall & Stevens, Inc., from the latter. Marshall & Stevens is en gaged in professional appraisal and valuation consulting services. Corporate News • Scarborough & Co. N. A1 Macenas has joined Scarborough & Co., Chicagobased insurance counselors to banks, as an account executive. Mr. Macenas previously had served as manager and vice president, I. Arthur Yanoff & Co. • MGIC Investment Corp. This Mil waukee-based HC has announced the opening of its North Central Division Office in Milwaukee. The division, which will serve a territory including Illinois and Indiana, will be headed by Charles W. Morris, vice president and division manager. Mr. Morris will have overall responsibility for sales, under writing and claims operation of the firm’s product lines, including resi dential insurance (Mortgage Guaranty Insurance Corp.), commercial mortgage insurance (Commercial Loan Insur ance) and directors’ and officers’ lia bility insurance (M GIC Indemnity He is a professional who understands the special insurance needs of banks. Are you over-insured or under-insured? In either case, you will be losing money . . . reason enough to see your Scarborough man. His experience and the knowledge gained from serving only banks provide him with the expertise to recommend the specific insurance coverage your bank requires. Ask him about. . . • Bankers Special Bond • Trust Operations Surcharge Liability Insurance • Employee Accident, Health, Dental, Life Coverages • Directors and Officers Liability Insurance • Credit-Life, Accident & Health Coverages To meet your bank insurance specialist write or call Scarborough the bank insurance people Scarborough & Company, 222 N. Dearborn St., Chicago, Illinois 60601 22 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Corp.). MGIC also has announced the promotions of Roger F. Martin to senior vice president, with responsibility for administration, claims, underwriting, personnel and mobile-home operations; William G. Gallagher to senior vice president of sales for the subsidiary, Mortgage Guaranty Insurance Corp., and to vice president of sales for MGIC; Robert E. Schwarz to MGIC controller; and Peter H. Miles to vice president-administration. • Brandt, Inc. David W. Daffron and Clifford D. Malone have been named district managers by Brandt, Inc., headquartered in Watertown, Wis. Mr. Daffron will oversee Brandt’s area including Kansas and western Missouri. He succeeds Ben Faust, who has re tired. Mr. Malone will have responsi bility for New Mexico and western Texas. WHY THE SCARBOROUGH MAH FOR YOUR RANK INSURANCE SPECIALIST? Dave Cushinq Missouri/Southern Illinois W allace S. Coutts Dies W allace S. Coutts, 56, vice presi dent and divisional manager, Nytco Services, Inc., St. Paul, died March 15 in Washington, D. C. Mr. Coutts joined St. Paul Ter minal Warehouse Co., the forerun ner of Nytco Services, in 1952 as auditor and later served as its sales representative for Wisconsin. W hen Nytco Services succeeded St. Paul Terminal Warehouse in 1969, Mr. Coutts relocated to Chicago as vice president and central division sales manager. In 1975, he advanced to divisional manager, central division, and also was named a director and executive committee member. Phone (312)346-6060 • Bank Marketing Association. John D. Stephens has been named to the newly created post of director, adver tising and public relations, at Bank Marketing Association, Chicago. In that position, Mr. Stephens will have re sponsibility for liaison with BMA mem bers and for advertising and public relations. He also will determine mem bership needs in those areas, will pro vide various services to members and will aid the BMA in publicizing those services. Mr. Stephens formerly was with a Detroit advertising agency. • MGIC Indemnity Corp. Richard B. Davis has been elected a vice president, MGIC Indemnity Corp., Milwaukee. He also has been appointed director of claims for the firm’s directors and officers (D&O) liability insurance program. Mr. Davis joined MGIC Indemnity in 1972. MID-CONTINENT BANKER for June, 1977 CORNERSTONE M em phis Bank & Trust is becoming the cornerstone of area banking. M ore and m ore banks, over 100 now all over the Mid-South, are banking w ith M emphis Bank & Trust. We have the fastest grow ing Correspondent Bank Departm ent in Dixie. W e're in th a t position not just because we o ffe r the full range of banking services, other banks also o ffe r im pressive shopping lists. Nor are w e m aking it just because w e 're big, some banks are bigger. Banks are banking on us fo r the same reason our other customers d o . . . w e 're dependable. W e're the most solid bank in town, stonesolid, and we back our services w ith personal attention and unbeatable experience. We th ro w in some extras, too, that bankers appreciate, like e xp e rt insurance capability, guidance in the construction and design of bank fa c ilitie s . . . even selection of furnishings. Solidarity plus the personal touch and the w illingness to take the e xtra step have made M em phis Bank & Trust the fastest grow ing -v*. M'V m ajor bank in M e m p h is. . . in all departm ents. That same philosophy is m aking us the bank w here bankers bank in the Mid-South. That's the biggest comlim ent a bank m&Æ «™53b & M?û§ Ém Member FDIC MEMPHIS BANK TRUST Correspondent Bank Department/ln Tennessee, 1-800-582-6277/1 n other states, 1-800-238-7477 THE BANKER'S BANK MID-CONTINENT BANKER for June, 1 9 7 7 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis That's why we do everything to make sure Hibbard, O'Connor & Weeks representatives are as knowledgeable as we can make them. Our standards for securities sales personnel today include college-level education, plus a track record in selling. Rigorous, 90-day training programs teach them every aspect of our business. And yours. A con tinuing series of seminars and lec tures from experts keep them tuned in on new industry trends, new rules and regulations. But they're more than voices 24 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis on the phone. Our staff has proba bly strung together more miles than any other investment banker our size. They're out visiting cus tomers, getting to know you. In every state in the nation. They learn securities back wards and forwards. They also learn about you— your opera tions, goals, aims for your own institution. Why all this effort? They work better with you. They stay longer with us. Many on our staff have logged five years-plus with us. That's a lot higher than the indus try's average in tenure. So, when you get our people on the line, you can be sure they know the ropes. HIBB ARD, O'CONNOR & WEEKS, INC. 1300 Main Street Houston, Texas 77002 (713) 651-1111 S ubsidiary Companies: Hibbard & O'Connor Government Securities, Inc. Hibbard & O'Connor Municipal Securities, Inc. MID-CONTINENT BANKER for June, 1977 ABA Stands Up to Competition at Conventions; Attempts to Rally Bankers to its Cause H E R E ’S a striking similarity to the various state banker association con ventions this year, occasioned by the strong stance being taken by ABA to achieve competitive parity with other financial institutions. An ABA representative has appeared at each state convention held in the Mid-Continent area this spring to ex plain the consensus bankers arrived at recently at the ABA’s spring meeting in White Sulphur Springs, W. Va. That consensus has been building throughout 1977, as the topic of competitive equal ity has been aired at numerous highlevel ABA meetings. But the discussions of the ABA’s somewhat revolutionary plan to stand up to thrifts and credit union competi tion haven’t been limited to the con vention floor. It’s being discussed at social events and in hospitality rooms, on the golf links and in the locker rooms after tennis matches. In short, the ABA is doing a good job in getting the word out to the nation’s bankers via the vehicle of state association con ventions. According to ABA President W. Liddon McPeters, president, Security Bank, Corinth, Miss., the movement to achieve competitive equality came in to focus in February when the ABA’s first banking leadership meeting de cided to preserve its options to work toward development of a legislative proposal that would remove a number of inequities, including those that de prive bank customers of a competitive interest rate on savings, allow banks the option of making consumer savings accounts more useful and make Fed membership less burdensome. A second meeting was held in April, at which bankers representing all 50 state banker associations and most other national banking trade associations de cided that the questions of greatest concern to them all boil down to fair treatment for bank customers and banks. Bankers want their customers to be T BY THE EDITORS MePETERS able to receive the same interest rates available at other institutions, Mr. Mc Peters said. They also want to avoid imposing on their customers the added costs of unequal reserve requirements, service restrictions, regulation and tax ation. “While we have been encouraged by the recent action of the Fed and the FD IC allowing banks parity with other financial institutions in the rate ceilings on individual retirement accounts and Keogh accounts, gross inequities in the treatment of bank customers and banks remain,” he said. The participants in the banking leadership meeting directed the ABA to make an all-out effort, on behalf of bank customers, to obtain full com petitive equity with thrifts. They further directed that, as a part of this effort, ABA should support legislation that would give banks and other depository institutions the option of offering con sumers the opportunity to write checks on a new type of savings account, simi lar to NOW accounts. “While recognizing that a clear link exists between this proposal and the proposal to allow the Fed to pay inter est on required reserves it holds,” Mr. McPeters said, “we believe that neither part of the package should be acted upon before more detailed expression MID-CONTINENT BANKER for June, 1977 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis DUWE and discussion of the second proposal has taken place and a resolution has been reached. Our concern is to pre serve the dynamic balance between the Fed’s ability to implement monetary policy and the dual banking system’s innovative strength.” He said that the ABA’s primary goal is to achieve parity for bank customers and banks and the ABA’s willingness to support legislation allowing this new type of account and to participate in the search for a way to make Fed mem bership less onerous for banks is de pendent on the achievement of that ob jective. The basic elements of an acceptable legislative and regulatory plan that would first achieve parity and then al low financial institutions to offer the new type of account as an optional service are spelled out in the following eight planks: • Parity of interest rate ceilings, re serve requirements and treatment of re serves on interest-bearing checking ac counts must be established for the bene fit of customers of all institutions that offer such accounts. • The statutory interest rate differ ential must be removed from the In terest Rate Control Act. The advantage of the rate differential must be removed by regulatory action from all classes of savings accounts for any institution that elects to offer check-like accounts. The National Credit Union Adminis trator must become a member of the Interagency Coordinating Committee; thus, the same rate ceilings that exist for other types of financial institutions would apply to credit unions. • The new type of account must be the only interest-bearing transaction ac count permitted for all banks, thrifts and credit unions—or for any other in stitutions that now or in the future of fer such accounts. The new account would be an alternative to, and not a replacement for, conventional checking and savings accounts. This would ap ply also to any interest-bearing accounts 25 on which demand-type withdrawals via electronic terminals are permitted. • Reserves on this type of account at banks that are not Fed members could be held at any correspondent bank. Uni form reserves on those accounts offered by depository institutions other than banks would be held by the Fed or by other depositories by agreement with the Fed. No class of Fed membership or affiliation would be compulsory for any financial institution. • The new type of account must be limited to customers who meet the strict definition of a household account. (The Connecticut NOW account law stipulates that only a “natural person” may hold such an account. This, for ex ample, excludes professional and farm business accounts. This law is a poten tial model for the language to be used.) • A one-year preparation or transi tion period must be allowed between enactment and implementation of the law. In the six New England states, however, the law would take effect im mediately, giving banks in those states the parity provided in the legislation. • Full, effective regulation and ex amination must be applied to all finan cial institutions offering this new type of account. The public interest demands this. • The Fed and the FD IC should provide banks the additional option of offering pre-authorized transfers from savings to checking accounts. According to Mr. McPeters, this pro posal meets all of ABA’s criteria for policy-setting. It ensures that all wellmanaged banks, regardless of size, would be able to continue to serve their customers profitably and effectively. Among the ABA representatives speaking on behalf of the platform at state banker association conventions is J. Rex Duwe, chairman of ABA’s gov erning council, and chairman and presi dent, Farmers State, Lucas, Kan. He said the reality of competition brought ABA to its decision to go all out to achieve parity. “It doesn’t make much sense for us to sit around debating whether our competitors should be al lowed third-party payment authority,” he said. “They already have it.” He listed the following points to sup port his statement: • S&Ls nationwide can offer pre authorized bill paying. • All S&Ls and mutuals can offer telephone transfers from savings to checking accounts. • All federally chartered S&Ls, statechartered S&Ls in 15 states, mutuals in 10 states, all federally chartered credit unions and state-chartered credit unions in six states can establish manned re mote service units. • S&Ls in eight states, mutuals in 11 26 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis states and credit unions in six states have the authority to offer checking ac counts under various names. • S&Ls and mutuals in the six New England states are allowed to offer NOW accounts— checking accounts that pay interest. • 19 states permit share draft ac counts—interest-bearing checking ac counts—for state-chartered credit un ions and the National Credit Union Ad ministration has proposed a permanent regulation authorizing all federal credit unions to offer share drafts. Banks’ competitors have gained these powers largely through regulatory and legislative action at the state level, fol lowed later by catch-up action at the federal level, Mr. Duwe said. “With the exception of NOW account author ity in New England, Congress is con spicuous by its absence in leading this parade of new powers for our com petitors,” he said. But all that could change if Fed Chairman Arthur F. Burns has his way, he continued. “Dr. Burns has publicly declared his preference for nationwide NOW accounts, combined with the pay ment of interest by the Fed on required reserves.” He said that bankers at the ABA leadership meeting concluded that the issue of interest on required reserves needs more detailed expression and dis cussion and should be resolved before either part of the package is acted upon. “The message that came through loud and clear was this,” he said. “We bank ers want to achieve parity for our cus tomers and our institutions, and our willingness to support legislation allow ing this new type of savings account and our willingness to help find a way to make Fed membership less onerous for banks depend on the achievement of that parity.” Bankers seem to be supportive of the ABA position and ABA reps at the state conventions have said they have not encountered any opposition to the plan from conventioneers. A mixed reaction was presented by Senator Thomas J. McIntyre (D ., N .H .), chairman of the Senate subcom mittee on financial institutions. The sen ator has commended ABA for support ing interest-paying checking accounts but has questioned some of the condi tions ABA has attached to its support. He has singled out as questionable ABA’s request that the new account be approved only after abolishing the statutory guaranteed savings rate dif ferential for thrifts and that the new ac count be the only one permitted now or in the future. “One has to wonder, therefore, whether the ABA is more interested in the conditions” which it attaches to the new account, than the account itself, he said. He suggested that the package ap proach ABA is taking might be intended to slow down the competition. (C ontinued on p ag e 62) Bank in Tow n W ith 15 Po p u latio n D efies O d d s, Celebrates 7 5 th Y e ar WAG once said, “My home town is so small that if you sneeze while A you’re driving through it, you’ll miss it.” All kidding aside, Freeport, Kan., is a small town, boasting a population of 15. What is remarkable about Free port is that it lays claim to being “the smallest incorporated city in the U. S. having a bank,” and that bank, Free port State, is celebrating its 75th year of operation! Freeport, which is located about 50 miles southwest of Wichita, has a fourth-class post office, two grain ele vators and a Presbyterian church. And, according to Ben Brooks, bank cashier and mayor of Freeport, “Our city af fairs are in excellent shape. W e have no bonded indebtedness, and a twomill tax levy covers our city budget of $613.26.” “What’s more,” says Leo F. Drouhard, bank president, “Freeport State not only is able to provide any services found in big-city banks, but it can of fer more personalized service.” The bank was chartered in 1902 and presently is located on the corner of Freeport’s only business block. When Mr. Brooks joined the bank staff in 1928, the city had a population of 100, three grocery stores, a library, two garages, a lumber yard and two filling stations. “But when World War II be gan,” he says, “a lot of people left Freeport to work in defense plants. And the kids leave town as soon as they’re able since it’s too expensive to start farming these days.” What does the future hold for Free port State? Mr. Drouhard says, “I have the utmost faith in rural America and in the independent banking system that has helped make this country what it is today. And our bank statements show that the community has faith in us to serve it.” * * MID-CONTINENT BANKER for June, 1977 The Fed Membership Problem: Why Is It Important to A ll Banks? By LAWRENCE K. RODS President Federal Reserve Bank St. Louis CURREN T TOPIC that should interest all bankers is the subject A of Fed membership, sometimes referred to as the Federal Reserve membership problem. From the perspective of those as sociated with member banks, the im portance of finding an early solution to the membership problem is obvious. Membership is an issue that affects member banks’ earnings and, after all, for most bankers, bottom line is of more than passing importance. I ’m sure that more than a few Fed members and their boards of directors currently are struggling with the question of whether their banks’ best interests are served by continuing their Fed membership. Indeed, this is not a decision to be taken lightly. For most member banks, to leave the system would mean depart ing from a relationship of long standing, a tradition that, perhaps, dates from the bank’s founding. More important, leav ing the system would mean giving up access to the discount window, losing the benefits of seasonal borrowings and giving up many other valuable services provided by the Fed. For nonmember banks, the member ship question should be of importance also because the ultimate resolution of the problem, whatever it may be, is certain to have a major impact on the future of our overall financial system, and the prosperity of all banks is de pendent on the perpetuation of a strong national economy. Members and nonmembers alike share an interest in the continued abil ity of the Fed to conduct monetary policy in an independent manner geared to the best interests of a free economy. Should membership in the system continue to erode, the capacity of the Federal Reserve to retain the independence necessary to perform its functions almost certainly would be lessened. Just how severe has the decline in Federal Reserve membership been? In 1945, almost half the banks in the country were Fed members. At the end of last year, only 39% of the country’s banks were members. In 1945, member banks held 86% of all domestic deposits. At the end of last year, they held only 74%. Furthermore, the rate of decline has accelerated in the past few years. Since 1973, banks have been withdrawing from the system at a rate of almost one a week. All this underscores the sever ity of the problem and the urgency of finding an early solution. What has caused member banks to withdraw from the system? It’s obvious that the principal factor is the relative cost of membership as compared with nonmembership. Simply stated, that cost is the cost of maintaining nonearning assets as required by the Fed. Although nonmembers must maintain some manner of reserves for purposes of liquidity, they frequently can do so at a lesser cost than incurred with Fed membership. The problem is very much a pocketbook issue. As such, any solu tion, to be meaningful, must be de signed to reduce the cost differential that has caused the problem. A number of solutions have been suggested. Lawrence K. Roos gave the ta lk on which this article is based a t the annu al convention o f the Arkansas Bankers Assn, in Hot Springs last month. MID-CONTINENT BANKER for June, 197 7 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis One approach would be to eliminate the differential between the costs of membership and nonmembership by requiring all financial institutions that directly or indirectly use Fed services to hold reserves with the Fed. Another suggested solution would be for the Fed to expand services to give member banks more for their money. A third possibility would be to lower member bank reserve require ments. Still another solution would be to lower the cost of membership by al lowing members to earn a return on their required reserves. The first of these approaches, that is, to require all banks to maintain re serves with the Fed, has been sug gested in the past. In fact, in 1974, the Board of Governors of the Federal Re serve System sent to Congress draft legislation to apply reserve require ments set by the Federal Reserve to demand deposits and negotiable orders of withdrawal at all financial institu tions. That bill never got out of com mittee. Extension of reserve requirements to all financial institutions almost certainly would face widespread opposition. F i nancial institutions not presently sub ject to Fed reserve requirements almost certainly would oppose the proposal. Such opposition has been successful in blocking legislative authorization for universal reserve requirements in the past; there’s little reason to believe that such proposals would fare better today. The second possible approach I mentioned is for the Fed to offer mem ber banks more in terms of expanded services. A study by our research staff at the Federal Reserve Bank of St. Louis in dicates that smaller member banks that maintain reserves at the Fed use the services of correspondent banks almost as extensively as smaller nonmember banks. This means that many Fed mem27 bers don’t take advantage of the full scope of services offered by the Fed. And, of course, certain services avail able at larger correspondent banks are not offered by the Fed. It’s conceivable that something could be done to en courage smaller member banks to use Fed services more extensively in order to receive more for the cost of mem bership. However, our research staff has concluded that without completely changing the nature of the central bank and without seriously altering the es tablished pattern of correspondent bank relationships, the Fed cannot expand its services enough nor attract enough additional use of its services to make any significant change in the current balance between membership costs and benefits. The alternative of lowering reserve requirements is an interesting one. It would enable member banks to gain maximum flexibility in converting re serves into earning assets. It would be among the least expensive options avail able to the Federal Reserve in that Fed earnings would drop only to the extent that the Open Market sold securities to offset reductions in reserve require ments. However, this proposed solution has several significant disadvantages. It could create serious problems for mon etary policy and could not be fully im plemented without enabling legislation from Congress. More importantly, it would provide little relief for smaller banks for which reserve requirements are presently at or near the statutory minimums. Moreover, if the Fed were to rely on this avenue for solving the membership problem, it could be diffi cult to raise reserve requirements should future economic and financial conditions warrant. For these reasons, this alternative probably should not be given serious consideration. Thus, we’re left with the fourth pos sible approach to the problem: autho rizing earnings on required reserves. Several methods have been suggest ed for accomplishing this. Some stu dents of the membership problem have proposed authorizing the Fed to pay direct interest on required reserves. Others have proposed granting mem bers permission to hold their reserves, or some part of their reserves, in in terest-bearing government securities. Still others have suggested various schemes for granting members borrow ing privileges at artificially low interest rates, thus providing them with an op portunity for earnings through rein vestment of such borrowings. All these proposals have one thing in common: They would have the ef fect of increasing income to member banks. Unfortunately, this raises ser ious political as well as economic prob- 28 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis lems. Payment of interest on member bank reserves would require legislation by Congress in the form of an amendment to the Federal Reserve Act. Political opposition to any such proposal could be expected from a variety of sources for a variety of reasons. Correspondent banks, for instance, might view payment of interest on re serves as an inducement for small banks to seek Fed membership, there by reducing their demand for cor respondent services. Actually, there are few grounds for such concern on the part of large correspondent banks for, as I mentioned a moment ago, studies show that sm aller member banks pres ently use the services of commercial correspondents to almost the same ex tent as small nonmember banks. So, even if payment of interest on required reserves were to attract more small non member banks into the Federal Re serve System, correspondent banks probably would not find the market for their services much reduced. Further opposition to interest on re serves could be expected from non member banks, which probably would view such action as a loss of the com petitive advantage they now enjoy. Rut the primary cause for opposition undoubtedly would arise from the fact that payment of interest on reserves would have the effect of reducing the amount of funds presently being re turned each year by the Federal Re serve System to the U. S. Treasury. Remembering 'Lucky Lindy' Clarence C. B arksdale (r.), ch. & CEO, First N a t'l, St. Louis, is shown being interview ed by G eraldo Rivera, reporter for ABC-TV's "G ood M orning, A m erica" program . M r. Barksdale and M r. Rivera stand in fro n t o f a replica of the Spirit o f St. Louis plane, which the late Charles A . Lindbergh fle w alone from N e w York City to Paris in 1927. M r. Barksdale is pres, and gen'l ch., Spirit o f St. Louis 1927-77 Com mittee, which spearheaded a g ian t cele bration in St. Louis the weekend o f M a y 20-22 in honor o f the 50th anniversary o f the Lind bergh flight. The in terv ie w w a s shown on n a tio nal television M a y 20, which w a s the date on which M r. Lindbergh took off on his his toric flight. St. Louis had a special p a rt in the Lindbergh flight because some businessmen in th a t city g ave him the financial backing to have a plane m ade fo r the trip . In 1976, member bank reserves averaged about $34 billion. At an in terest rate of 4.5%, interest on those re serves, if it had been paid, would have amounted to approximately $1.5 billion a year. Thus, Federal Reserve earn ings, which presently amount to up ward of $ 6-6/2 billion annually, would have been reduced by $1.5 billion. And, since the Federal Reserve trans fers all its “profits” to the Treasury, Treasury revenues from the Fed could be expected to decrease with payment of interest on reserves. Of course, T r e a s u r y re v e n u e s wouldn’t decrease by the full $1.5 bil lion because member banks would re turn a portion of that sum to the Treasury in the form of taxes. Still, they would be reduced substantially. The fact that funds currently going to the Treasury would increase earnings of commercial banks almost certainly would spark opposition from some members of Congress and certain seg ments of the general public who fre quently are suspicious of anything that increases bank profits. And the effect of opposition from these sources can not be minimized. Thus, any solution to the member ship problem involves immense inher ent complications. Unless you readers have not already become totally dis couraged, let me point out still more factors complicating the solution of the membership problem. As you know, thrift institutions in several northeastern states have been authorized to offer their customers in terest-bearing accounts that do not dif fer substantially from checking ac counts. Negotiable orders of withdraw al, or NOW accounts as they are com monly called, seem destined to spread nationwide. Extension of NOW accounts could further exacerbate the membership question, for member banks, when sub jected to the increased cost of paying interest on NOW accounts, would be even more resistant to bearing the cost of Fed membership. It can be safely assumed that, unless a way is found to reduce the cost of Fed membership prior to, or simultaneous with, the ex tension of NOW account authority, erosion of Fed membership will con tinue at an accelerated pace. This brings us to still another com plication: the issue of access to Fed services by nonmember financial insti tutions. While thrift institutions are threat ening to compete nationwide with com mercial banks for checking-account business, thrifts and other nonmembers also are pushing for access to Federal Reserve services without having to bear membership costs. Concurrently, (Continued on p ag e 40) MID-CONTINENT BANKER for June, 1977 Systematic, Reasoned Approach Needed To Reduce Regulatory Overlap HEN I talk with businessmen, bankers and consumer advocates around the country, I hear one per sistent complaint: profound dissatisfac tion with the pervasiveness of govern mental intervention in our day-to-day affairs and with the reams of paper re quired to effect even the simplest and least contro versial transaction. Although I ’m not optimistic a b o u t the prospect of re versing this trend, there’s reason for hope. Increasingly, liberals and conservatives alike recog nize that we have a real problem on our hands and that failure to deal with it threatens to disrupt our economy and stifle our society. The issues involved aren’t simple. Most informed people share the recog nition that our economy is too large and complex to function properly with out some governmental supervision or regulation. For example, while some might disagree with the direction of monetary policy at a particular time, few would deny the need for a mecha nism to control the quantity of money in the system. Similarly, although one may disagree with the specific policies of many environmentalists, the absence of some controls over disposal of com mercial waste and other pollutants would lead to disastrous consequences in a highly industrialized society such as ours. Finally, I believe there’s gen eral agreement that some surveillance and supervision of individual banks’ op erations are required to avoid an ex cessive number of failures and the re sulting economic instability. Accordingly, the problem is not that By GEORGE A. LeMAISTRE Chairman FDIC Washington, D. C. W regulation and supervision of econom ical and commercial affairs are inap propriate, but rather that regulation often outlives the problem it was in tended to address; that we don’t always take sufficient care to choose the least costly and drastic means to achieve the desired end and that often, regulation results in unanticipated consequences that can be more severe than the prob lem the regulation sought to remedy. However, it’s not surprising that these problems are so rarely dealt with ef fectively. All too often, those who are regulated, while screaming loudest about the sanctity of an unfettered freeenterprise system, grow comfortable in their regulated environment and resist mightily when any serious effort is made to deregulate. Similarly, regulatory bodies acquire a vested interest in their own existence and the “turf” they reg ulate, and this prevents their objective assessment of the regulatory policies they pursue. As a result, government agencies often are loath to engage in critical self examination. Finally, it must The talk on which this article is based was given by Mr. LeMaistre at the annual convention of the Conference of State Bank Supervisors last month. MID-CONTINENT BANKER for June, 1 977 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Barnett Leaves FDIC W A SH IN G TO N , D. C.— Just as M id -C o n t in e n t B a n k e r was going to press, announcement was made of the election of George A. LeM aistre as the new F D IC Chairman. Robert E . Barnett, who had been chairman since March 18, 1976, resigned as of June 1 to join a law firm here. Mr. LeM aistre was ch., City Nat’l, Tuscaloosa, Ala., when he re ceived the F D IC appointment in 1973. He is a past president of the Alabama Bankers Association. Mr. Barnett holds a law degree from Harvard Law School. be acknowledged that while it’s possible to deal with these issues with some ease in the abstract, real-world solutions aren’t easy to produce. In part, this is a consequence of practical politics and the fact that any change in the frame work of an industry’s regulation may lead to significant short-run dislocations or adjustment costs. At least as impor tant, however, is the simple fact that answers to many of these problems are extremely difficult to discover. These factors provide a partial ex planation of why bank regulatory re form efforts have failed to date and why the growth of government and regula tory agencies seemingly is inexorable. Notwithstanding the difficulties, I be lieve it’s important— and perhaps cru cial—that bankers and bank regulators develop a systematic and reasoned ap proach to regulatory reform. In my judgment, the failure to develop such a positive approach will have several adverse consequences. A golden oppor tunity will be lost to deal in a meaning ful way with problems of excessive and inefficient regulation at both state and federal levels and to highlight the unin tended ill effects and hidden costs of regulation. Similarly, an opportunity will be lost to remedy certain demon strable inadequacies in the present supervisory framework. I don’t intend to focus on the subject of bank regulatory reform generally, but rather on a facet of that subject—that is, the overlapping and, at times, con flicting relationships between state and federal bank regulation and supervision. It’s conceded by all that extensive over lap of law and functions exists. What’s not well known is the extent of the costs and problems that may flow from this duplication or the gaps that may exist in regulation by virtue of tasks simply “falling between the cracks.” And, con versely, we don’t have a grasp of the benefits that may flow as well from this redundancy. As I have suggested in the past, the relationship between state and federal 29 bank regulation cries out for rationali zation to a far greater extent than does the framework at the federal level. Be cause I cannot now prove this case to my own satisfaction and because I am not certain as to the appropriate solu tion to the problem, I intend to propose to the FD IC board that we sponsor a comprehensive and detailed examina tion of this subject. At this juncture, I should digress to make clear that I don’t mean to attack, explicitly or implicitly, the dual system of bank regulation and supervision and to explain why I think it’s important to develop new strategies aimed at as suming the continued vitality of that system. Indeed, I’m opposed to consoli dation of bank supervision and regula tion at the federal level because I be lieve the existence of regulatory choice implicit in our dual system is one of the primary reasons we have a diverse, competitive and innovative banking sys tem. This is not to say there’s any magic in the notion of a dual-banking system per se. Many countries get along well with a unitary system of banking. In deed, many arguments on behalf of dual banking tend to get lost in rhetoric and, as a result, fail to make most ef fectively the case in its favor. Similarly, by our attachment to the rhetoric of dual banking, we may ignore the need to take the steps necessary to ensure its continued stability. Nor do I reject out of hand arguments advanced by pro ponents of consolidation. Indeed, con solidation at the federal level would re sult in certain economies, and, if noth ing else, would make the system tidy and more comprehensible to those un familiar with its intricacies. Nevertheless, I strongly favor and will argue vigorously for a bank reg ulatory system that maintains the con cept of regulatory choice at state and federal levels for two reasons. First, the system is in place and, unlike many other regulatory structures in govern ment, it’s functioning effectively and has demonstrated the capacity to change; in effect, to reform itself. Given this fact, it seems to me that those who argue against the efficacy of regulatory choice bear a strong burden of per suasion. Second, and perhaps more im portantly, banking history demonstrates that the existence of regulatory al ternatives provides, in part at least, one of the mechanisms the regulatory re form movement seeks—a means of self adjustment and self reform. In effect, something like a market mechanism may be seen at work with good reg ulation driving out bad over the long haul. Recent banking history is replete with examples of this phenomenon. Al though many disagreed with the spe 30 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis cifics of his decisions, it’s clear, in retro spect, that Jim Saxon (former Comp troller) served the banking industry and the public well by allowing national banks to do things repugnant to his colleagues at the FD IC and the Fed. In effect, he helped take banking out of the conservatism that was a holdover from the depression. Similarly, in re cent months, while Congress has found itself unable to act, state legislatures and state regulators have taken the lead in pursuing alternative strategies of dealing with financial reform and elec tronic funds transfer systems. As a re sult, we have numerous laboratories whose experiments will provide insights as to the most nearly optimal approach. Also, I find it highly doubtful that a single banking agency would have felt the need to implement significant re form in its examination and supervisory procedures as did the Comptroller of the Currency’s Office. At least at this juncture, I think it’s beneficial, not harmful, that the FD IC and the Comp troller’s Office have different strategies for dealing with the insider-abuse prob lem. Because of my views that regulatory choice is, on balance, beneficial, my purpose in focusing on the overlap be tween state and federal supervision and regulation is not to suggest that either the state or the federal government should retire from the field, but rather A dam s of Arkansas Elected CSBS President/Chairman Harvel C. Adams, Arkansas banking commissioner, was elected president and chairman, Conference of State Bank Supervisors, at its 76th annual conven tion last month. Another Mid-Continent-area banking commissioner, H. E. Leonard of Oklahoma, was elected CSBS second vice president and chair man, district meeting planning com mittee. Elected first vice president-president elect was E. D. “J ack” Dunn, Georgia commissioner of banking and finance, while Harry Bloom, Colorado banking commissioner, was elected secretarytreasurer. O th e r Mid-Continent-area m en named to CSBS posts are: chairman, District Three, Joseph H. Hemphill, Tennessee banking commissioner; chair man, advisory council, Van Smith, presi dent, Bank of Tuckerman, Ark.; vice chairman for membership promotion, Earl Triplett, president, Memphis Bank; advisory council member, District Two, C. Wayne Highsmith, president, Edgemont Bank, East St. Louis, 111.; and ad visory council member, District Four, Charles L. Childers, president, Tyler (Tex.) Bank. that we should begin a systematic ex amination of this relationship aimed at ensuring its continued vitality. This is especially important, from the point of view of state banking, given some of the forces at work in banking today. W e’re all aware, for example, of the Fed’s concern with continued attrition from the system. Because of this con cern, the Fed is certain to come for ward with a proposal aimed at mini mizing attrition through payment of in terest on reserves, probably coupled with a proposal for nationwide NOW accounts. At least one observer—Carter Golembe—has pointed out that if the Fed is successful in minimizing mem bership costs, a powerful incentive will be created for banks to seek a national charter to avoid dealing with two regu lators. In my judgment, the best insurance we can have for the health of state banking is not a defensive or negative posture, but rather an objective and creative, if at times painful, effort to revitalize the system. Although overlap between state and federal supervision hasn’t been a focus of attention during the past three years, the problem has long been recognized. A concrete effort to eliminate or minimize the overlap recently was com pleted at the FD IC . On February 1, 1974, the FD IC , in cooperation with the Conference of State Bank Super visors and the states of Iowa, Washing ton and Georgia, embarked on a 13month program whereby the FD IC would withdraw from examining a cer tain percentage of state nonmember banks in each of those states. The ex periment was designed to study the im plications of relying solely on state banking department examinations. At the beginning of 1975, the corporation determined that a fair and more com prehensive evaluation of the experiment could be made if two consecutive ex aminations were undertaken by each state banking department. Accordingly, the experiment was extended. In 1976, the FD IC conducted an examination of each of the banks that had been ex amined by the states during the pre ceding two years, with the states ex amining those banks they had not ex amined in 1974 and 1975. The ob jectives of the 1976 FD IC examinations were to provide a basis for evaluating the experiment as well as assessing the condition of the examined banks. Early this year, an analysis was made of each examination by the F D IC ’s Division of Bank Supervision and an appraisal made of the experiment as a whole. Based on the recommendations of this division, the F D IC determined not to expand the withdrawal program on the basis pursued in the experiment. Rather, an attempt will be made to implement MID-CONTINENT BANKER for June, 1977 Call Jim Dixon, Vice President and In vestment Officer at Fourth National, and you have called upon 18 years of experience in the investment areas of banking. Jim is in charge not only of Fourth National's own in vestment portfolio, but he is also here to help you, our cor respondent bankers, with your's. Whether it be ad£ vicepn particular investments and jp d s , or overall strategy on invest- Ibma Society of 31 ID-CONTINENT BANKER for June, 1 9 7 7 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis How to w in custom er 32 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis MID-CONTINENT BANKER for June, 1977 and influence Realtors. In many communities, the key to getting a larger share of the home mortgage market is the Realtor.® It's a fact that many Realtors (and their prospects) d o n 't know the advantages of a M AG IC loan. A lowdownpaym ent loan insured by M GIC. And how it helps sell more houses and close on them faster by elim inating governm ent red tape. To help you get more of the existing hom e market, M G IC has put together a colorful prom otional kit that's yours free fo r the asking. Each contains a counter card plus a supply o f 8-page M AG IC loan booklets w hich explain mortgage insurance to home buyers. You can use it in your loan department, give it to Realtors, builders, stamp your name on it and give it to retail stores. For copies, mail in the coupon or call us at 800-558-9900, extension 6641. (In Wisconsin 800-242-9275.) or contact your M G IC representative. . 5222 Mortgage Guaranty Insurance Corporation MGIC Plaza, Milwaukee, Wisconsin 53201 □ Please send us________ copies of your Realtor promotional kit. N am e________________________________\__ ________ Address---------------------------------------- ----------------------------- __________________________ ________________ City & state_— ----------------------------- ------------ Zip------------- F irm M G IC Mortgage Guaranty Insurance Corporation. MID-CONTINENT BANKER for June, 1977 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 33 a “divided examination p r o g r a m ,” whereby examination and supervisory responsibilities continue to be shared, but manpower is used more efficiently. An agreement to proceed in this fashion has been concluded in Georgia, and it’s anticipated that such agreements will be reached in other states. Such efforts as this don’t begin to ad dress, in a comprehensive manner, the possible problems posed by the rela tionship between state and federal bank regulation. Moreover, while, throughout this discussion, I have referred to the problems resulting from duplication and conflict inherent in this relationship, I have not yet made a systematic case for the proposition that the overlap in volved creates serious problems. However, it’s possible to identify some of the sources of serious concern. First of all, it’s clear to me that there’s no need for two complete agencies to examine and supervise the safety and soundness of a single financial institu tion. Accordingly, either the state or federal government, in this case, is bearing unnecessary cost and wasting scarce resources that might be used more efficiently elsewhere. For example, both consumers and the financial com munity might profit if these scarce re sources were concentrated on problems that are not addressed effectively at the federal level. Conversely, by deferring to the states in areas where they have a comparative advantage, federal reg ulators can bring their resources to bear more effectively on serious problems. Second, it also seems clear to me that, as Carter Golembe suggested, it’s usual ly more costly and burdensome for a bank to deal with two regulators than one. Third, in cases where problems arise, the need for two regulators to co ordinate their actions sometimes means that a problem or violation is dealt with less vigorously and expeditiously than it otherwise might have been handled. W e’ve found that the problem of co ordination is especially severe in bankfailure cases. Although it’s possible to outline these problems and possible sources of un necessary cost, I must admit that I don’t have a precise handle on the extent and costs involved. Nor am I certain that I have identified all the problems or given them proper weight. Moreover, if there are solutions to the problem, these strat egies must be spelled out in greater de tail than they have been to date. For these reasons, I intend to pro pose to the FD IC board a comprehen sive study, which will attempt to ad dress, in an objective and systematic fashion, the questions I have raised. Such a study would, first of all, try to describe in detail the relationship be tween state and federal bank super 34 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis vision and regulation so as to pinpoint precisely the nature and extent of dupli cation and conflict that actually do exist in the system. Such a study would focus on the costs and burdens that flow from such redundancy as well as bene fits that flow from the present system. Additionally, the study would seek to identify special problems that arise as a result of this unique partnership be tween state and federal regulators. The goal of such a study wouldn’t be a de velopment of one master plan as to how to rationalize this system, but rather a series of options that might be pursued administratively, at the state or federel level, in Congress or in state legisla tures. It’s my view that, we should go for ward with such a project because I be lieve that these issues are serious and because I believe, quite sincerely, that it’s important to understand and to at tempt to ensure the vitality of our dual system of bank regulation and super vision. • • The Competition (Continued from p ag e 14) ficient number of common grounds among depository types of institutions (which, incidentally, are growing less distinguishable from one another) to suggest that they may in the years ahead view themselves as “kissing cousins,” with their real competition being perceived as the non-depository financial institutions that I alluded to before. The potential flexibility of a bank HC is indicated by the following list of nonbanking activities that are per mitted, pending or have been denied generally to national banks (from the Chicago Fed’s E conom ic Perspectives, March/ April, 1 9 7 7 ): Activities approved by the board— Dealer in bankers’ acceptances; mort gage banking; finance companies (con sumer, sales and commercial); credit card issuance; factoring company; in dustrial banking; servicing loans; trust company; investment advising; general economic information; portfolio invest ment advice; full payout leasing (per sonal property, real property); com munity welfare investments; bookkeep ing & data processing services; insur ance agent or broker/credit extensions; underwriting credit life and credit ac cident and health insurance; courier service; management consulting to non affiliate banks; issuance of travelers checks; bullion broker; land escrow services; issuing money orders and vari able denominated payment instruments. Activities denied by the board— Equity funding (combined sale of mutual funds and insurance); under writing general life insurance; real es tate brokerage; land development; real estate syndication; general management consulting; property management; non full-payout leasing; commodity trading; issuance and sale of short-term debt obligations ( “thrift notes” ); tr a v e l agency; savings and loan associations. Activities pending before the board — Armored car services; underwriting mortgage guarantee insurance; under writing and dealing in U. S. govern ment and certain municipal securities; underwriting the deductible part of bankers’ blanket bond insurance (with drawn); and management consulting to nonaffiliated, depository type financial institutions. Isn’t it a paradox that, as banks and other depository financial institutions take on one another’s attributes, there is an opportunity for bank HCs to move into an ever-increasing number of ac tivities? At the same time, the non depository institutions are moving into varied financial and non-financial areas. The type and kind of financial com petitors, both depository types and non depository types, are becoming hydra headed. Hercules was successful in de stroying Hydra, but I doubt that bank regulators and regulators of other de posit-type institutions—who have tasks similar to Hercules’—will be as suc cessful! • # Less Is M ore: Energy-Saving Customers Target of H C Program Customers of Missouri’s Commerce banks who wish to make their homes more energy efficient not only will save on heating and air-conditioning bills, but receive help in making their homes energy efficient by way of special loans and advice from the banks. Member institutions of Commerce Bancshares, Inc., which is headquar tered in Kansas City, have offered en ergy-conscious customers low-interest, long-term loans. Loan officers at the banks have been trained to advise cus tomers on governmental energy pro grams and offer free brochures con taining energy-saving tips. Among the home improvements that qualify as energy savers under the HC’s loan program are increased in sulation, new roofing, new siding, storm windows, a new heating or airconditioning system, a new water-heat ing system and installation of a solar heating system. MID-CONTINENT BANKER for June, 1977 1977 B LU E BOOK The completely revised 1977 edition of the Western Bank Directory is ready. The leatherette - bound, pocket-size book with spiral wire binding is indexed for quick ref erence. It lists every bank and branch in ALASKA, ARIZONA, CALIFORNIA, HAWAII, IDAHO, MONTANA, NEVADA, NEW MEXICO, OREGON, UTAH and WASHINGTON. The Directory contains the names of banks, branches, officers, statement figures, phone numbers, zip codes, industries, population, city, county, date organized, transit numbers and correspondent banks. IF YOU ARE IN A BANK OR DOING BUSINESS WITH BANKS IN THIS AREA, THE BLUE BOOK SHOULD BE ON YOUR DESK. WE HAVE A LIMITED NUMBER AVAILABLE. Ozdez T ^ o u z d f MAIL TO: Please enter our order for W estern Banker Publications, Inc. _______ copies of the 1977 111 Sutter Street, Suite 1330 Western Bank Directory. San Francisco, CA 94104 Invoice will be enclosed with your Directory or you may pay in advance. Price: $10.00 one copy, $9.00 each for two or more copies; 75 cents postage and handling will be added for each Directory. Applicable California tax. MID-CONTINENT BANKER for June, 1977 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Bank/Company_______________________________________ Street Address________________________________________ C ity________________________ State__________ Zip Code By-------------------------------------------------------Title________________________________ 35 iiia ■«- is •••ti lis t N ational um im The conventional automated telle- machine is exactly that—a machine. An independent, setf-contained automated feiler.!^ Each machine has its cwn intelligence system, which accounts for almost half the cost of an ATM. And the typical ATM is offered in only one design, so you may have tc buy more—or less—ATM than you need. You need more than a machine. You need The System, The Teller-Matic System is a network of automated customer terminals, all operated by a single intelligence source. This sharing of intelligence also means shared intelligence costs, making it possible to reduce the cost per terminal drastically compared with the conventional ATM. And because The System has built-in versatility, it offers you a wide range of design and application options. An American-Standard Company Hamilton, Ohio 45012 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis You need more than a machine. You need an automated teller System versatile enough to adapt to your individual require ments and advanced enough to meet your future needs. That’S the idea behind The System. Consider app ication flexibility. Teller-Matic offers a f JLy secured customer terminal for exterior and remote locations. For lobby and other secured locations, you can get a nonsecure terminal and save the cost of unneeded security features. Consider cabinet styling flexibility. You can choose from one of Teller-Matic’s standard cabinet designs, or provide your own customized cabinet to coordinate with a particular interior design theme. Consider future expansion needs. With The System, you can start with only one or two terminals—plus an intelligence module—and plug in additional terminals as you need them. Each intelligence module will operate up to six customer ter minals. And conversion of the entire system to on-line opera tion is simple and economical. Healthy Trends in Banking Developing From Debate Over Capital Adequacy U FFIC IE N C Y of capital has both a colorful past and an assured fu ture, though the pitch of concern has been a bit lower of late. What is of growing importance with regard to this matter in our country is the way the supervisory authorities use the capital account, its size and compo sition, as a key control mechanism. This is not surprising when liability management has made reserve require ments less effective for such a purpose and when congressional expectations of regulators have heightened greatly. The heart of the matter is how to provide for steady and suitable accumu lation of capital so that banks may help satisfy growing credit demands at home (though this aspect currently is still in its celebrated lull) as well as provide their prudent share of the burgeoning requirements overseas. Let me make three brief comments on cap ital sufficiency: First, we need to continue our high ly successful efforts in helping define governing criteria. The rigid and rather arid formulas of the past have yielded to modem banks’ pioneering research and publications. While the trend to ward greater capital efficiency has been criticized by some as leading to hazard ous leverage, by and large it has been accepted gradually by regulators, rat ing agencies and capital markets. Second, internal accretions to the capital account must remain significant contributors. In this regard, apart from earnings, of course, dividend and tax policy are highly relevant. Over the last two years, the market place has renewed its interest in cor porate dividend policies. While the ageold trade-off between what should be consumed today and husbanded for future growth remains stubborn, many in the banking industry find a sensible solution in regular dividend boosts, rising but below the improvement in earnings. Nor should the potential gain to capital accounts be overlooked from issuing Treasury shares to satisfy the needs of dividend reinvestment and profit-sharing plans as more than 30 companies in other industries are doing. In the area of federal tax policy, the objective we seek obviously would benefit from the elimination of double S By GABRIEL HAUGE Chairman Manufacturers Hanover Corp. N ew York City taxation of dividends, a matter that appears to engage the interest of the present Administration. And let me urge bankers, out of recent experience gained in my own state and city, to be alert that their institutions are not used as lightning rods for anti-business political action, resulting in discrimina tory state and local income taxation. Third, resort to capital markets will come to be placed increasingly on a systematic basis within planning and fund-raising units, giving less em phasis to ad hoc visits to the markets at the “perfect” time. Innovations will continue to seek new ways of reaching the market on satisfactory terms. Prog ress so far has been spotty, but the effort must continue, sparked by our underwriters and our own staffs. Finally, and basic to everything else, is the growing realization that earning power is capital. The recent reem phasis on boosting the rate of return on assets reflects rediscovery in the early ’70s of this basic truth. It means get ting more out of the resources available to us, i.e., increasing productivity. This retum-on-assets strategy has taken the form of cost-control systems that really control, of “unbundling” product offer ings in response to realistic pricing, of biting the economy bullet with respect to premises and products and people. It’s one of the healthiest trends in banking. Telling th e Story. Just as the issue of capital sufficiency will be our regular companion in the years ahead, the same is true of its shadow— disclosure of operating and financial information. In 1969, when the Fed made sub MID-CONTINENT BANKER for June, 1977 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis stantial amendments to Regulation F governing the what and where of bank reporting, it was believed by many that this matter had been definitively dealt with. Such optimism was shortsighted and short-lived. The ensuing years have witnessed a steady demand for and offering of information. Annual re ports have moved from a few com forting sentences on the orderly nature of the world and a few austere pages of financial statements to extensive, highly analytical documents that take hours to read and days of study to digest. At one institution I know fairly well, the annual report of 10 years ago in cluded three pages of financial state ments and notes and one page of his torical statistics. By 1976, these had increased to 19 pages of financial statements and notes and nearly 15 pages of supplementary disclosure. Full-scale quarterly reports also abound, to say nothing of the 10K, the 10Q, the F -l, the F-2, large bank supple ments and prospectuses. There is little doubt that this tra ditional disclosure is to the good in the broad scheme of things. Beyond what is required of us, industry leaders are engaged in what would seem to be a new challenge to the competitive spirit in banking: Take it off! Two points here bear comment: First, have we developed a level and kind of disclosure substantially beyond the interpretative inclination of a ma jority of readers? Signs of what we might call “statistical fatigue” are ap parent even in the professional invest ment community, where the number and quality of analysts following our industry, contrary to most, has in creased over the last decade. The com plexity and volume of disclosure have made it harder for any one expert to cover the spectrum of bank services. Security analysts, reviewing the bank ing industry some years ago, often specialized along geographical lines: W est Coast banks, southeastern banks, money center banks, etc. More recently, they have begun to specialize along functional lines: international banking, retail banking, operations, real estate, to mention a few. Beyond meeting the demands of some of our supervisors who seem to 37 revel in esoterica, it’s incumbent on us to bridge the gap in understanding with the sectors of society important to us. W e must do more than we are doing to translate this extensive dis closure into an idiom understandable to the small shareholder, the press, the rating agencies, our customers. For ex ample, at our place in March, the con troller held a seminar on financial dis closure for members of the New York business and financial press. It was re vealing to learn how welcome among them was a good deal of ABC discus sion of notes to financial statements, for example, in our annual report. It has been a source of great per sonal satisfaction to observe the im pressive rise in amount and quality of public commentary by banks and bank ers on subjects ranging from technical professional matters to broad political, social and philosophical themes. The challenges, beyond our principal social obligation of rendering quality banking services, are many: the urban crisis, minority opportunity, community support, economic adult education, among them. I don’t want to force the proverbial open door with regard to telling our story, but with our magnifi cent record, I say to bankers: Redouble the effort without forgetting the aim. Shifting A rea/ Product M arkets. For several years, it’s been apparent that the lines of demarcation between one kind of financial institution and an other were being eroded, perforated and bridged. Scarcely by a grand de sign, pardy even by accident, we are in the midst of creating nationwide banking-service systems. Individual banks, of course, have had powers for certain geographical and functional latitude, through au thorized facilities such as loan produc tion offices, Edge Act offices, factoring, merchant banking and other financial affiliates. And, of course, the calling officer himself is a highly efficient por table branch. The amended Holding Company Act, however, was a deliberate effort to evolve an institution through which financially related services could be of fered. While some banks have found the latitude afforded by the amended act rather limiting and others rather formidable, it’s proving to be a step forward. As we well know, regulatory authori ties have become increasingly cautious about holding company possibilities. The degree of flexibility allowed in the future depends largely on how success fully our industry utilizes existing op 0 YOUR DIRECT UNE TO PROMPT, PERSONAL CORRESPONDENT BANKING SERVICES For knowledgeable, personalized attention to correspondent banking problems... you ou gh t to k n ow a DETROIT BANK-erffraYfer? D E T R O IT BANK &TRUST Member FDIC 38 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis tions within the risk scale as the reg ulators perceive it and with due regard for congressional concern about “finan cial power.” In this context, there arises the ques tion of how foreign banks should op erate within our continental limits. Their offices in this country presently report assets equal to about one-eighth of domestic banking assets, and grow ing rapidly. As international bankers, following the best example in the world, we believe in a forthcoming welcome to competitors from beyond our borders. The extent to which Amer ican banks can be permitted the range of freedom that foreign banks enjoy in this country—as against the extent to which foreign banks will be geared down to our permissible scope of op erations—lies at the heart of the mat ter under resolution. W e hope the in evitable compromise will lean toward the greatest possible freedom for all. E lectronic Funds Transfers. Most bankers are well aware of the volu minous information accumulating on the systems and services lumped together under the acronym, E F T . Our task is to sort reality from myth and to an alyze how we can best put E F T to work for the customers we serve. The problem is scarcely new. A great many major developments in banking history relate to changes in the payment mechanism: from barter to coin, to paper money, to check and now to electronic pulses. Each generation of bankers has added some refinements to the internal efficiency and market util ity of the mechanism. It’s the state of technology and needs of the market place that determine the rate of prog ress. As an industry, we are now in a posi tion to effect critical changes that will impact the payment mechanism and how we conduct business well into the future. It’s a formidable task as the first report of the National Commission on Electronic Funds Transfer makes clear. The core problem, of course, is the old one— fear of the unknown. To deal with it requires addressing the is sues of privacy, fraud, liability, cost/ benefit, cooperation versus competition, governmental control and/or regulation and market needs. And I emphasize market needs, only to point out that building an E F T system does not equate to providing an E F T service. While our market is both corporate and retail, the current focus is on retail E F T . Corporate E F T has evolved more quietly through the years with the Fed Wire, Bank Wire, Chips and, soon, SW IFT. These E F T issues really are not new to our industry or unique to E F T . The jargon, the technology or the decibel level of the debate must not sway us MID-CONTINENT BANKER for June, 1977 is for Computer. And ours is a complex of highly sophisticated data processing equipment. Miich means you can receive monthly status reports showing your com m is sions, claims, premium income by branch and by month, plus year-to-date totals and aggregate totals since the beginning of your contract. C is also for Character and Capability, two things an Integon representative possesses in abundance. H e’s a specialist in his field. Yet, he knows enough about banking to com municate on your terms. S o when he sets up the program, he makes sure everything is running smoothly. Then he pays you regular visits to keep things that way. And if you need him in-between times, a call brings him on the run. C is for Change, too. And anytime a change brings new personnel to your firm, our representa tive is there with a complete training program which helps your staff sell better. S o your bank can earn more. T h e Integon representative sees that you always have all the supplies you need, including a thorough Reference Manual that details the entire Integon program. And in furnishing these free sup plies, we never lose sight of the fact that your business is banking. S o all paperwork is designed for quick and easy completion by loan officers, not underwriters. And finally, C is for Collect Call. Which you should make to J . Wayne Williard, Jr., at 919/725-7261. O r write him at Integon Life Insur ance Corporation, P O. B ox 3199, Winston-Salem, N. C. 27102. A s Vice-President of Credit Insurance, J. Wayne Williard, Jr., Vice-President he can provide more information. O r arrange an appointment at your convenience, without obliga tion. And no matter what questions you have, he can answer them. Because he knows the credit insurance business from A to Z. (J) INTEGON’ MID-CONTINENT BANKER for June, 1977 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 39 from our best instincts as bankers and businessmen. W e shall innovate, but not let technological novelty for its own sake obscure our obligations to custom ers and shareholders. Nor can we fail to exercise the initiative in timely fashion, for if we lag, others are pre pared to move out ahead. Conclusion. Whatever prospects and problems the winds of change bring in the long, unwinding future, it’s well to fix in our minds this root fact: W e con duct our affairs under a franchise of the people, acting through their duly constituted authorities. Ours is not an ordinary business, but one charged with operating the economy’s money machine. That we find ourselves under rather continuous drumfire is, there fore, neither surprising nor new, for there are those who see human rela tionships solely in terms of victims and victimizers. But, on the other hand, we retain a great degree of freedom in our eco nomic system. This can only reflect the fact that we have attended with skill and understanding to the needs of the people we serve and the society of which we are a part. It is my judgment, supported by that of professional opinion readers, that we enjoy a position of respect and goodwill in the broad community. That means our franchise is secure. To keep it so remains in our hands and those who come after us. In the doing, let it be said of us that we held to first principles: responsiveness in service, prudence in judgment, integrity in dealings. * • Fed Membership (Continued from p ag e 28) the Justice Department is pressing the Fed to provide its clearing and trans fer services without discrimination on the basis of membership, and to price these services in such a way as to per mit competition from private nonfinancial firms that may want to offer sim ilar services. Obviously, if present membership requirements remain un changed, and if all financial institu tions, member or nonmember alike, have access to Fed facilities and ser vices without being subjected to re serve requirements, the incentive for maintaining membership would be all but eliminated. All these issues have a bearing on proposals for solutions. All are obstacles to an easy solution. The membership problem, which in itself is complicated, becomes part of an extremely complex set of related issues, each of which af fects many groups in many ways. The Board of Governors and the Re serve banks have been working dili gently to devise legislation to ease the membership problem. Hopefully, draft legislation will be forthcoming for con sideration by Congress before too long. But any draft legislation is only a first step toward solving the membership problem. Any such proposals will be subjected to the legislative process, and along the way the many diverse inter ests involved—large banks, small banks, correspondent banks, member banks, nonmember banks, thrift institutions and public-interest groups— almost cer tainly will want to be heard from. Each of these groups has special in terests. Each can be counted on to ex press its own point of view vociferous ly. A consensus may not come easily. Yet, a solution must be found. The Federal Reserve System must maintain the strength necessary to defend its ability to perform its functions effective ly. If the Federal Reserve, through erosion of its membership base, were to be weakened so as to lose its ever present traditional independence, we, as a nation, will be unable to maintain the economic strength that has pro vided the bulwark for our growth and prosperity. If that were to happen, WHEN IT COMES TO DEBIT ORCREDIT CARDS, he RIGHI ...D IC E — e ir ST^H capabilities are extensive— ranging from card design to mailing direct to your customer. We provide a comprehensive package that supports the embossing and encoding requirements of all major manufacturers of auto mated equipment. So when your bank or savings & loan is selecting card systems, choose Rand MPNally — it makes the rest of the system work so much easier. Your card system can be trouble-some without quality plastics and prompt card issuance. When you choose Rand McNally’s plastics and guaranteed issuance dates, you also get the assurance of more than a century of Rand MPNally exper ience in supplying the financial com munity with quality products and services. Rand McNally’s bankcard RAND MÇNALLY & COMPANY RANDCARD DIVISION P.O. Box 7600 Chicago, Illinois 60680 312-673-9100 40 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis MID-CONTINENT BANKER for June, 1977 Look for our name behind the best in correspondent banking service First City National Bank of Houston is the largest bank in the nation’s 5th largest city. To correspondent customers, our name and position assure the finest in complete banking services. The First City National Bank name also stands for vast experience and professional under standing of the businesses and industries that have shaped the economic character of the great South west. Agribusiness. Oil and gas. Petrochemicals. Import/export. Over the last 100 years our finan cial participation has earned us a reputation of banking expertise in these and other specialized industries. While the strength of First City National Bank of Houston is computed in billions of dol lars, it is best measured by our ability to serve you and your customers. At every opportunity. Which is why correspondents need a bank that is in a posi tion to provide more service. We’re in that position. The Regional/Correspondent Department, First City National Bank, P.O. Box 2557, Houston, Texas 77001. F IR S T CITY NATIONAL BA N K OFHOUSTON We can do it all. MID-CONTINENT BANKER for June, 1977 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 41 every financial institution and, in fact, every individual citizen of the United States would suffer the terrible conse quences, just as the people of Great Britain today endure the harsh eco nomic conditions that have stemmed to a large extent from the loss of in dependence of the Bank of England. So, I say, we must solve the Fed membership problem, and I have abso lutely no doubt that we will. But to do so will require a spirit of “give and take” and a willingness of all parties concerned to compromise a portion of their own interests for the good of all. American free enterprise has ele vated us from a weak nation at the time of the Revolution into the great est agricultural and industrial power on earth. So successful is our system that we define poverty at an income level higher than the average income level of the world’s second most pow erful nation, the Soviet Union. I believe that we can maintain the economic progress we have made and build on it. A strong Federal Reserve System is an essential element in ac complishing that objective. For the Fed to function with optimum effectiveness, it must have a constituency of member banks that support the objective of the system and that are not penalized by reason of their membership in the sys tem. This is a critical time for commer cial bankers and for representatives of our central banking system. Important decisions will be made that are certain to have an impact on our nation’s economy long into the future. Whether we are able to reconcile our differences and work together to resolve them in the interest of a stronger and a greater America will determine the course and quality not only of our lives, but of the lives of future generations for years to come. * * New Cash-Management Service Offered Firms, Correspondents By First Nat'l, St. Louis ST. LO U IS—First National has be gun offering its corporate customers and correspondent banks a new cash-man agement service. It’s designed to pro vide a variety of daily bank-balance and account-activity reports. Information provided by the system includes ledger and collected balances, funds available and various debits and credits. The service also gives corpo rations and correspondent banks de tailed reports on checks and draft pay ments, lock-box deposits, wire transfers sent and received and cash letters de posited. The service is a cooperative effort between First National and National Data Corp., Atlanta-based data-entry, collection and information-dissemination firm. As the system has been designed, First National reports a customer’s ac tual account and activity balance daily by magnetic tape to National Data’s processing center. This data is stored in National Data’s computer memory bank. When a report is required, the information then is assimilated by National Data and changed to a reporting form. These status reports can be trans mitted via TW X, Telex, Mailgram, magnetic tape and telephone. “Our new system enables First Na tional corporate and correspondent cutomers to locate and identify their cash resources immediately, minimizing unplanned borrowings while maximiz ing their investments,” says Clarence C. Barksdale, the bank’s chairman and CEO. “The system also provides our customers timely account details and summary banking information allowing them to manage more effectively their cash positions on a daily basis. And it reduces the cost of collecting and re porting information.” LOOKING P R O FESSIO N AL IS W HAT I T S A L L A B O U T mm V Career apparel... by Creative Image... to make your corporation as individual as you. Don't compromise w ith one of your most valuable assets-your personnel.Your corp oration and personnel are d iffe re n t-w e show your difference the fashionable way. M CBF-3 CREATIVE IMAGE fo r th e c o rp o ra te im a g e 1709 N. Market, Dallas, Tx. 75202 Title State ___ZÌD TAKE A GOOD LOOK..« THE IMAGE IS YOU THROUGH m ÊÈÈÊÊË 42 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis m MID-CONTINENT BANKER for June, 1977 > ^ \ Why banks suggested /Etna Money for a buy-out in specialty foods and cash flow in sausages. T h e m anagem ent o f a specialty food com pany had an opportunity to buy ou t the owner. T h ey turned to a bank for money. B u t the total required was beyond the b an k ’s capacity. Solution? /Etna Money.SMPartici pating w ith the bank, we created a package consisting o f an Interm ediate Term L oan to finance the acquisition, plus a line o f revolving credit for operating capital. Result? A profitable buy-out and sm ooth transition for the new owners. A n d a growing custom er for the bank. T h e m eat processor had expanded his facilities, as part o f a long-range plan, b u t his sales were slower than projected. C onsequently, there was a shortage o f working capital — b u t the bank was unable to provide additional funds. Solution? /Etna M oney secured by accounts receivable, inventory and equipm ent. Result? M anagem ent n ow had the tim e and funds needed to build sales — and paid o ff the loan w ithin tw o years. /Etna M oney. It’s flexible and quickly available for your custom ers. It’s a w orkable alternative for you. C all us for details. You get action w ith /Etna because our business is /Etna Business Credit, Inc. ■ One of the /ETNA LIFE &. CASUALTY companies to help your business. Although certain identifying facts have been changed to protect client confidentiality, these are authentic examples of ¿Etna Money at work. 200 West Monroe Street, Chicago, IL 60606 (312) 782-6189 •One Main Place, Dallas, TX 75250 (214) 651-0361 •One Allen Center, Houston, TX 77002 (713) 658-0349 •530 North Water Street, Milwaukee, W I53201 (414) 272-3102 MID-CONTINENT BANKER for June, 1 9 7 7 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 43 Major Issues Involving Directors Discussed by Ex-FDIC Chairman ORM ER FD IC Chairman Robert E. Barnett discussed four major issues affecting directors at the 27th Assembly for Bank Directors in Mexico City recent ly. The issues are (1) the question of regulatory approval of changes of con trol in operating in sured banks; (2) informed directors; (3 ) director com pensation; and (4) p o s s ib le f e d e r a l legislative activity affecting directors. BARNETT When a newly chartered state nonmember bank seeks deposit insurance, he said, the FD IC has something to say about the control of the bank and about selection of the bank’s directors. However, he added, the agency doesn’t have any control over a change in ownership or control of the bank after it has been approved for deposit insurance. Therefore, a bank may be chartered and receive F D IC insurance after a careful review by the agency and the state chartered authority concerning the financing of ownership interests in the bank. Shortly afterward, the bank may be sold to individuals or groups who would not have passed the initial re view because they had borrowed too heavily to finance the purchase of the bank. Such occurrences have happened in the past, he said, and might well happen in the future. They are not limited to instances in which the problem seen in the takeover group is simply one of fi nancing. F D IC regulations require that notice be given to the appropriate federal banking agency of changes of control or changes of ownership in all insured banks, he said, but no authority exists in any of the federal regulatory agen cies to disapprove that change of own ership. “The corporation has traditionally been reluctant to seek that authority and responsibility,” he said, “but it may well be that the time has come for the corporation to change its po sition and urge Congress to give it the F 44 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis authority to prevent a change of con trol in a nonmember insured bank.” Many of the problems relating to abuse of insider positions have occurred shortly after a takeover by a new con trol group, he said. “W e have recently been concentrating our examination and supervision efforts on banks in which there is a change of control, but that may not be sufficient in itself to solve the problem. It may be easier, more efficient and better for the banking in dustry as a whole if individuals or groups who have a history of abusing their insider positions are prevented from acquiring ownership in a bank, rather than trying to control them once they have achieved control.” Although the FD IC has something to say about the selection of directors of a newly chartered bank, it has no legal authority to determine who is or is not a bank director, Mr. Barnett said as he initiated his second topic. “W e do not expect or want all di rectors to be bankers by profession, but bank directors must make some effort to learn about banking and to take their jobs seriously,” he said. “W e are trou bled by situations where directors serve solely because of the honor or prestige attached to being a bank director, and where the person so honored does not intend to be an independent force in forming the policies of the bank. W e want informed and interested directors.” He said it is easy for directors to be informed when management makes an effort to supply information. “I wish that were the universal situation but, unfortunately, it is not. But even when management is not doing what it should to see that directors are kept informed, it is possible, even for a nonbanker di rector, to be knowledgeable if he asks the right questions and knows where to look for information. In banking, to a greater extent than in other businesses, I believe, there are sources of informa tion that ease the job of knowing how your bank is doing and what condition it is in,” he said. The FD IC regards bank examinations as playing a key role in the process of keeping directors informed, he said. No matter which agency performs the examination, it provides a wealth of in formation and an excellent, even if somewhat critical, picture of the condi tion and financial situation of the bank. “These examinations are intended to be useful to the bank, and we think they are,” he said. “Most managements feel the same way. Obviously then, directors should review the report of examination carefully.” He said the F D IC ’s policy is to meet with directors, at least in cases of prob lem situations. In keeping with this policy, he continued, it is the practice in most regions for the examiner to hold a meeting with bank directors if prob lems of consequence are found at the examination or if significant adverse trends are noted since the last examina tion. In virtually all instances involving problem banks, a representative from the F D IC ’s regional office will meet with involved directors, and, in most cases, an invitation is extended to the state authority to participate in the meeting. “The F D IC is cognizant of the bene fits flowing from more frequent meet ings with the boards of banks under our direct supervision and anticipates hold ing such meetings with increased fre quency in the future,” Mr. Barnett said. “We are also actively reviewing the posture of the FD IC in this regard with a view of improving on the timeliness and conduct of such meetings. Whether or not our examiners meet with the bank’s board, it remains the responsi bility of the director to familiarize him self with the substance of the examiner’s Mr. Barnett was FDIC chairman at the time he appeared before the As sembly for Bank Directors. He resigned his post June 1 to run the Washing ton, D. C., office of Kutak, Rock, Huie, Brown & Ide, a law firm with principal offices in Omaha and Atlanta. FDIC Director George A. LeMaistre moved up to fill the chairmanship vacancy. MID-CONTINENT BANKER for June, 1977 around money the fin e s t is S T 1 A U T O M A T I C COIN W R A P P E R Amounts and denominations autom atically in d ic a te d by patented " re d bordered windows” . A m o un ts in windows always in reg is ter. . . eliminates mistakes. Accommodates all coins from lc to $1.00. 2 T U B U L A R COIN W R A P P E R Basic coin wrapper in extra strong kraft stock. Printed in 6 different standard colors to d iffe r e n tia t e denominations. T rip le d e s ig n a tio n th ro ug h colors, p rin tin g and letters. Tapered edges. 6 Especially designed for machine filling . . . a real time-saver. Packed flat. Instant patented "Pop Open” action with finger tip pressure. Denominations identified by color coding . . . 6 different standard colors. 3 5 OLD S T Y L E COIN W R A P P E R R A I N B O W COIN W R A P P E R 7 8 D U Z I T A L L COIN W R A P P E R Extra wide . . . extra strong. Designed for areas where halves are wrapped in $20.00 packs . . . “ red bordered window” for ease of identification. Accommodates $20.00 in dollars, $20.00 In halves. Tapered edges. F E D E R A L BILL S T R A P Package contents clearly identified on faces and edges by color coded panels with inverted and reverse figures. Made of extra strong stock to assure unbroken deliveries. Only pure dextrine gumming used. Color coded for quick, easy identification. Red for pennies. . . blue for nickels . . . green for dimes . . . to indicate quantity and denominations . . . eliminates mistakes. Tapered edges. 4 K W A R T E T COIN W R A P P E R Wraps 4 denominations in half size packages. A miniature of the popular “Automatic Wrapper” . . . 25c in pennies, $1.00 in nickels, $2.50 in dimes, $5.00 in quarters. C O L O R E D BILL S T R A P Entire strap is color coded to identify denomination. Printed am ount appears on top and bottom of package. Extra wide for marking and stamping. Extra strong stock for safe delivery and storage. Pure dextrine gumming. 9 BANDING S T R A P S Ideal for packing currency, deposit tickets, checks, e t c .. . . do not break or deteriorate with age. Size 10 x \ inches and made of strong brown Kraft stock with gummed end for ease of sealing. Packed 1000 to a carton. SEE THE C. L . DOWNEY YOUR MID-CONTINENT BANKER for June, 1 9 7 7 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis DEALER COMPANY OR SEND '• HANNIBAL, FOR FREE SAMPLES. MISSOURI • DEPT« MC 45 comments and not simply assume that because nothing has been brought to his attention there is no need for him to investigate the report,” he said. Until recently, Mr. Barnett said, the FD IC has not officially notified a bank when it is placed on the problem list. More and more disclosure, both volun tary and involuntary, has been made by banks in the past few years of informa tion that would have been judged to be highly sensitive—perhaps fatally sensi tive—only a few years ago, he said. In most cases, he added, the disclosure has not proved disastrous or even particu larly difficult for the affected bank. “Whatever we may have felt about the possible side effects,” he continued, “I have heard from many bankers and they usually talk about responsibility for the safety and soundness of the bank. But that’s not the only area to which they are referring. Another area is that concerning the profitability of the bank. He said that a good deal of research in recent years has led to the conclusion that sound, prudently generated bank profitability is crucial to the future soundness of the bank. “We feel this strongly at the F D IC ,” Mr. Barnett said. “In our economic sys tem, ‘profitability’ is not a dirty word and is, in fact, to be encouraged. We have been doing some work on the development of statistical early warning systems and we have come to the conclusion— one that has been defended " Even though many directors are happy to serve because of the prestige involved, adequate compensation is an important factor in getting capable directors directors that they would like to be formally notified when the bank they’re managing or directing has been placed on our problem list. To meet that re quest and because we feel that we will be able to make supervisory changes more easily if directors are aware of the problem status, we have begun an experimental program of formally noti fying bank directors in two of our re gions when the regional director makes a recommendation that their bank be designated a problem bank.” Whether or not the board of a bank on the F D IC ’s problem list is told that it is on such a list, he said, every di rector of every nonmember bank on the list should know that the FD IC is un happy with the condition and manage ment practices of the bank. The entire tone of the F D IC ’s supervisory efforts should leave no doubt in the mind of the director of a problem bank that his bank is a matter of serious concern to the FD IC . “When we turn down an application for a branch on the basis of the financial condition or management weakness of the bank,” he said, “or even when the most extreme possibility occurs and the bank is closed, there is no basis for a diligent director to be surprised. He has had ample opportunity to find out that the FD IC and others, such as inde pendent auditors, think his bank is in difficulty and has had equally ample opportunity to acquaint himself with its condition.” When FD IC officials speak about the responsibility of directors, he continued, 46 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis by leading bank stock analysts for some time— that the most important key to the future of a bank is to be found in its income statement and its bottom line. Sound, prudently generated profits are crucial. This represents something of a change from the traditional view of the bank regulator that the balance sheet and bank capital ratios are the sole reliable indicators of bank sound ness.” He said this stance creates some dif ficulties for the directors because, to a considerable extent, the earnings of a bank are not an accurate reflection of the skill and quality of management. “The earnings performance of a bank depends largely on external factors,” he said, “such as the general economy, the competitiveness of the relevant market place, Fed monetary policy, etc. But it is possible to compare the performance of your bank with that of other banks subject to these same external forces. There is a great deal of information available to facilitate such comparisons. This information is made available on a routine basis by the federal agencies, several investment firms and some firms whose major business is providing com parative banking data.” He said that the problem for the di rector may be that there is too much financial data available, making it diffi cult to see the forest for the trees. “We can count on management to point out those areas in which the bank’s performance looks good,” he said, “but the director must take a broader picture than that. The FD IC , on a semiannual basis, sends a good deal of comparative financial information to each insured bank. W e have found that many banks use this information as a basis of a directors’ meeting and we have received many complimentary let ters from bankers and directors about the value and usefulness of this informa tion. “When we looked into it a little deeper, however, we found that the banks that were pleased with this ser vice were all banks whose performance looked good in comparison to banks in their area or other banks of their size. I am afraid that data for the bank whose performance looks bad may sim ply be thrown in the wastebasket and the board may see none of it.” Mr. Barnett advised directors whose banks look poor in comparison with others in the area to ask why. There may be a reasonable answer, but that answer should be brought out into the open. Management should be required to furnish an explanation. The F D IC would like to see the most able people possible selected as bank directors, Mr. Barnett said, shifting to his third topic. However, he continued, in view of the responsibilities and risks involved, the best people are not going to be willing to serve unless they are adequately compensated. “Our regulation on insider transac tions implies that we do not believe that directors should receive their compen sation in the form of favorable treat ment in their dealings with the bank. Our view is that directors should be paid openly and directly for their con tributions and for their assumption of responsibilities and that compensation should be in keeping with the contri bution. “W e do not have a great deal of hard information about compensation of di rectors, but we do have some general impressions formed from conversations with bankers, with our bank examiners and with other experts in the field. Let me summarize these conclusions: “First, banks pay directors, substan tially less than nonbank firms of com parable size. In many cases, the dis parity is huge. “Second, many banks have no guar antee of director compensation that re flects their ongoing responsibility. In stead, compensation is based on at tendance at meetings. There may be some logic to that as a means of en couraging directors to attend meetings directly, but all the discussion we have heard of directors’ responsibilities has stressed the fact that directors have an ongoing responsibility whether or not they attend meetings or vote on par- MID-CONTINENT BANKER for June, 1977 Put our staff on your staff. Sometimes it takes more than one to reach a goal. That is where the Whitney comes in. For over 9 0 years, the Whitney reputation for sound banking knowledge and reliability has been a strong factor for success in correspondent banking. The Whitney would welcome the opportunity to join with your organization to achieve mutual goals. MID-CONTINENT BANKER for June, 1977 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Reliability in banking since 1883 47 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Because w e read b ottom lin es to o . w e plan b e tte r bu ildin g s. The only sound reason to build or remodel is to increase earnings, and we can help you determine the best way to do It because we know your business. When you work with us, planning for tomorrow comes first. Detailed surveys determine where your present and future customers are and will be. The last thing we do is design and build a building. There’s not another firm In your city, or In the country that can offer our up-front consultant services...and back them up with a building guarantee like ours. Simply stated: w e 'll b u ild i t r i g h t . . . o n t im e . . . a n d w ith in b u d g e t. We can make that statement because we’ve been In this business for 64 years, and have planned, designed, and built or remodeled more than 6,000 buildings. We’ll be glad to discuss our past and your future. We have a man In your area. m Bank Building Corporation J L We ’ll build you a business. OFFICES: St. Louis, Washington, D.C.; Hartford, Conn.; Chicago, Atlanta, Dallas, Denver, San Francisco ticular issues. Since there is a continu ing responsibility, it may well be that there should be a continuing compen sation. “Third, supplementary services pro vided by directors (such as service on special committees) is generally not compensated for at a reasonable level. In some cases, there is no payment. In other cases, there may be a nominal payment of, say, $20 per meeting, even though preparation for the meeting may involve many hours of homework. “Fourth, there is an extremely wide disparity in compensation of directors even among banks of the same size. “What I want to stress is my strong view that directors should be adequate ly compensated.” He said that the F D IC ’s regulation on insider transactions is aimed at prevent ing directors or insiders from receiving benefits from the bank in a way that is not considered appropriate. The reg ulation is not aimed at holding down deserved and earned remuneration. Even though many directors are happy to serve because of the prestige in volved, adequate compensation is im portant in getting capable directors. Mr. Barnett said that directors should be paying attention to the gen eral area of congressional activity, the final topic of his talk. Currently, Con gress is considering expansion of NOW accounts and the payment of interest on demand deposits. The question of mandatory Fed membership or reserves for all depository institutions offering third-party payment accounts and the rapid development of E F T S will cer tainly get legislative attention. Other important issues are agency restructuring or consolidation and sim plification of Truth-in-Lending require ments, not to mention a number of bills in the general area of urban disinvest ment and housing that are expected to be introduced, he continued. Congressional banking committees have acted with a great deal of initia tive and independence over the past few years, he said, not only in legisla tive tactics and strategy, but also in the more philosophical field of gen erating ideas. Not only are the members of these committees cognizant of the complex issues facing banking, he said, but their staff members are well versed and philosophically determined. It will be interesting to see whether the committees give the Carter Admin istration time to get up the speed in the areas of interest to banking and whether they will be willing to change their positions if they should differ from those of the Administration, he said. • * National BankAmericard Sued By Ad Agency Over Use, Marketing Concept of Visa' SAN FRANCISCO— National Bank Americard, Inc., has changed its cor porate name to Visa U.S.A., Inc., in keeping with the change in name of its bank card from BankAmericard to Visa. Other former names for the Visa card are Carte Bleue, Chargex, Barclaycard and Sumitomocard. Over the next 30 months, 46 million cards and decals at 2,000,000 merchant locations in more than 110 countries will add Visa “as the final step toward assuring recogni tion and acceptance between all card holders and merchants.” Ibanco, Ltd., multinational membership organization for the worldwide Visa bank card pro gram, has changed its name to Visa In ternational Service Association, creating the acronym VISA. As these moves are underway, an ad agency based here— Hoefer, Dieterich & Brown, Inc.—filed suit in su perior court here against National BankAmericard for the latter’s use of the Visa name and marketing concept in its international marketing and ad vertising operations. Ibanco, Ltd., also is named in the action. The ad agency’s suit maintains that the Visa name and marketing and ad vertising concept were created by the ad agency in 1973 and introduced to National BankAmericard at that time as part of a competitive presentation for its advertising account. Hoefer, Dieterich & Brown subsequently was awarded the account, but was told that MID-CONTINENT BANKER for June, 1 977 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis its presentation was merely an exercise and that its ideas and materials re garding Visa would not be used. W ith in weeks after being selected, the ad agency resigned the N BI account be cause of professional conflicts, an agency spokesman says. The suit claims that the Visa name and marketing concept are advertising property belonging exclusively to Hoe fer, Dieterich & Brown. In response to the suit, National BankAmericard—in the person of D. W. Hock, its president—has this to say: “The word ‘Visa’ has been used in con nection with travel and commerce from time immemorial; in fact, it has been used in connection with banking ser vices since 1972. The notion that it is the property of an advertising agency is ridiculous. W e consider the claim to be totally without merit, both in fact and in law, and intend to vigorously defend this lawsuit.” Mr. Hock also is president of Ibanco. • Robert F . Miailovich has been appointed assistant director (super visory surveillance and enforcement) in the F D IC ’s Division of Bank Super vision in the Washington, D. C., head quarters office. He had been special assistant to the chairman since 1975. In his new post, Mr. Miailovich will initiate and administer programs that monitor banks, identify potential prob lem characteristics and enforce cor rective action. He has been with the FD IC since 1963. PERSONNEL PROBLEMS? WHETHER YOU ARE A PERSONNEL MANAGER LOOKING FOR AN OFFICER, , . OR A BANKER WISHING TO RELOCATE WE CAN HELP Put this c o n f i d e n t i a l and g u a r a n t e e d s e r v i c e to y o u r u s e t o d a y . FINANCIAL PLACEM ENTS a division of Bank News, Inc. 912 Baltimore, Kansas City, Mo. 64105 816-421-7941 TOM CHENOWETH, Manager 49 How Automated Financial Analysis Works as Tool for Commercial Lending HE TRADITIONAL role of the computer in banking has been pri marily to reduce the dependence on clerical manpower through the use of automated procedures. The application of the computer to provide accurate, timely and detailed management infor mation, however, has been slower to develop. Recent changes in the banking and accounting environment have enabled commercial banks to make better use of management information systems (M IS) to improve the efficiency of the commercial lending function. Automat ed financial analysis (A FA ), a system developed jointly by the credit depart ment and the ED P services division of my bank, represents one of these recent programming developments. The objective behind the AFA sys tem was to develop a more dynamic tool for corporate financial analysis which would assist the lending officer in making credit decisions. More spe cifically, our objective was to accom plish the following: • Reduce the cost while improving the speed, uniformity and quality of credit analysis. • Place more emphasis on a bor rowing customer’s past and projected funds flows for a clearer understanding of a potential credit. • Create a data base from which additional information could be gener ated for industry comparisons, market ing information, internal operating re ports and a host of other applications. • Ultimately improve the quality and management of the loan portfolio, and reduce loan losses through more timely recognition of deteriorating credits. The Base Report. Three sets of man agement tools can be generated by the computer as part of the AFA system. The first tool is a fairly traditional base report. This report includes a simple restatement of a customer’s financials in the bank’s format. In a number of cases, balance sheet and income state ment entries are re-categorized to reflect the bank management’s desired treat ment of certain items. The rest of the base report is generated by the pro50 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis By DAVID M . COIT Commercial Lending Officer First National Bank Boston gram from the basic balance sheet and income statement input plus some addi tional information extracted from the footnotes. These sub-reports include a synopsis of important footnotes, a rec onciliation of net worth, a sources and uses statement for working capital, ratio analysis, common statements (the expression of all balance sheet and in come statement items as a percentage of total assets and gross income, respec tively) and a trend analysis. The Funds Flow Report. The second report is the fu nds flow report, which provides an in-depth analysis of a com pany’s cash cycle. The report empha sizes four major categories as net gen erators or users of cash. The first area sums all operating revenues and ex penditures during the year and calcu lates a net funds flow from operations. The second part determines the net funds flow resulting from changes in trade and operational balance sheet ac counts, while the third part calculates the net funds flow from external sources. A fourth category, for discre tionary and other miscellaneous funds flows, includes capital expenditures, ad ditions to intangibles and extraordinary gains and losses. These four groups of funds flows are netted to the change in cash and equivalents over the period in question. The purpose of this report is to give the loan officer a readily available tool for checking where funds are being used or made available. It is hoped that the report will also provide a clearer understanding of where repay ment for a loan is likely to come from. The Forecast. This funds flow analy sis is an integral and important part of This article is from the March, 1977, issue o f “Journal of Commer cial Bank Lending,” publication of Robert Morris Associates. It is pub lished with permission. the third tool in the AFA system, the forecast. This potentially effective tool will allow the credit analyst or loan officer to run some relatively sophisti cated projections of capital require ments, as well as a full set of base re port analyses showing the effects of projected business activity on ratios and performance indicators. The fur ther dynamics of sensitivity analysis are available by manipulating the input as sumptions based upon historical trends, industry standards or the estimates of management and the loan officer. The key element in this whole ana lytical process continues to be the lend ing officer. These reports do little more than massage the available figures from a variety of angles and thereby provide the officer with a more complete pic ture of the story they tell. A number of major changes in the financial environment have made auto mated financial analysis possible. These changes have occurred both in the ac counting profession and within the op erations areas of banks themselves. Changes in banks. In banking, the computer has been used primarily to reduce the awesome overhead costs of “back-shop” operations. The shift of the clerical burden onto the computer represents a logical and necessary evo lution for banks, where the labor sav ings alone in areas like check process ing have made such shifts easy to costjustify. The computer also takes up less space and, in most cases, can be run 24 hours a day. A secondary function has been to de velop new customer services that would strengthen corporate relationships while also helping to pay for the comput er. In addition, the quality and cost of a number of existing corporate and bank services have been improved by computer application. Services such as payroll, automated financial account ing and freight payment have been run with significant labor cost savings, re ductions in paper work, greater speed and improved accuracy, while main taining the flexibility to handle special situations. Additional incentives for AFA’s de velopment. It is hard to argue with MID-CONTINENT BANKER for June, 1977 Build some muscle into your credit life protection! With Globe Life’s complete package of Credit Life plans, yo u ’ve got full-strength protection weighed in your favor. And Globe has strength in reserve, too . . . a capital structure o f over $50 m illion and over $2.5 billion of life insurance in force . . . coast-to-coast. Globe Life . . . a national leader with muscle to rely on. GLOBE AND ACCIDENT INSURANCE COMPANY Oklahoma City ASSETS ÌN EXCESS OF $120 MILLION MID-CONTINENT BANKER for June, 1977 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 51 banks’ initial emphasis on clerical com puter applications, where the dollars saved are so apparent. On the other hand, it is difficult to say specifically that a new automated financial analysis system would “red flag” a bad loan early enough to warrant the cost of the program. Thus additional incentives have had to play a significant part in the development of AFA. The fact is that many banks have ex hausted most of the major labor-saving computer applications and are looking for new ways to employ available re sources. Many banks have additional main-frame capacity or can add capaci ty at limited expense, and some have talented computer analysts and pro grammer staffs anxious to develop chal lenging new and productive systems. The availability of these resources has made it possible to consider shifting the emphasis from transaction systems and record keeping to information, con trol and decision support systems. Among the banking industry’s lead ers in the application of computer technology for financial analysis has been Robert Morris Associates. RMA’s Annual Statem ent Studies provides a dynamic breakdown of industries by SIC classification and size for compara tive analysis. Banks’ use of a computer ized data base could vastly simplify the input process to RMA for this accumu lation of data. And an eventual link up between a bank’s computer and RMA could generate a quick compara tive and variance analysis on any com pany within the scope of the RMA re port. Changes in accounting practices. Changes in accounting principles have had no less effect in making automated financial analysis possible. The accounting profession, the SEC, and other federal government agencies are all pressuring corporations for greater disclosure and more uniformity in published financial reports. From this type of data it is much easier to develop a more accurate, detailed and standardized financial analysis for any credit or investment decision. Before these changes, the variety of financial presentations required that the figures be analyzed individually. Often presen tations varied so much that compari sons to other companies or the develop ment of industry standards was either impossible or misleading. Organization. The most important factor in the successful development of any new automated system is proper initial organization, involving heavy user participation. Specific delineation of the requirements, objectives and capabilities of all parties involved will help assure a smooth development and a substantive system once it is in opera tion. One key element in the project’s or ganization is the staffing of the devel opment team. It should be made up of credit personnel on one side and com puter systems personnel on the other. Since the system is user-oriented, many of the output requirements must be de termined by credit people, and the credit side of the team should stay in daily contact with the programmers to assure that the output criteria are being understood and met. Working relationship of users and programmers. The users probably will not be aware of all the system’s capa bilities or limitations for meeting their criteria. Therefore, a serious education process is necessary not only to inform the programmers of the requirements of the system, but also to inform the users of the computer’s capabilities. This educational process should delve into what is required in the data base as well as the logic of the output and of the system, so that both sides of the team can maintain an open and effec- How well do your present savings passbooks, or statement savings registers, promote your image ? Have you ever stopped to think what your statement or regular savings passbooks are doing for your image? Or, how much more attractively designed passbooks could do? Well, the people at Rand McNally have, and as a result, have come up with some great ideas in color, style and design that can work for you. Or, if you prefer, they have a staff of talented artists that will help you create an image all your own. A name you know, a company you should know more about Rand MÇNally Financial Systems Division P.O. Box7 6 0 0 /Chicago, Illinois60680 / (312) 267-6868 10 East 53rd Street / New York, New York 10022 / (212) 751 -6300 206 Sansome Street / San Francisco, California 94104 / (415) 362-4834 52 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis MID-CONTINENT BANKER for June, 1977 Great craftsmen are infinitely patient and skillful with the tools of their trade and their lives are animated by a spirit that dares to be different. Good banking is a craft that must be practiced and developed by men and women who, like artisans of great skill, care about the the lasting quality of their work. it First National Bank O f Commerce CORRESPONDENT BANKING DEPARTMENT Member FDIC 210 Baronne Street / New Orléans, Louisiana 70112 / 504-561-1473 MID-CONTINENT BANKER for June, 197 7 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 53 "The AFA could be offered as a service to other banks which either do not have the resources to develop their own system or are unable to justify the expense." tive dialogue throughout the system’s development. The intensity of the project develop ment also requires a high degree of compatibility among team members. The ability of all team members to communicate with each other in the language of credit analysis and of com puter technology is an important ele ment in this mutual undertaking. Once the team is established and the initial education process is completed, the members should discuss and think through all aspects of the program from the needs and objectives, to the staffing and paper flow, to transition and acceptance. Each aspect should be considered in the present environment, while allowing flexibility to adjust to accounting changes or to add on other services or reports at a later date. The ultimate responsibility for “finalizing” the initial systems design should rest with the eventual user group or the credit members of the development team. Conceptual changes will un doubtedly occur throughout the devel opment of the functional specifications, but once these are “finalized,” all speci fications must be frozen during the pro gramming phase; otherwise, cost over runs and missed target dates will occur due to continually changing program ming requirements. Scope—non-technical. The scope of the AFA system will be determined largely by the portfolio of loans to be analyzed. If many of a bank’s borrow ers are private companies that pub lish their own financials, the possibility exists for some inconsistent applications of their numbers. This could cause dis tortions in the analysis, negating much of the benefits of a standardized sys tem. The obvious strength of a particu lar company or the overbearing qualita tive (vs. quantitative) aspects of a credit may also eliminate the need for the in-depth analysis by an AFA sys tem. But most commercial banks lend to a large number of companies who have their figures audited. And those financials lend themselves readily to a standardized, in-depth analysis. Another major determining factor for the scope of an AFA system is its ac ceptance by the loan officers who will use it. Naturally enough, many loan officers have their own analytical sys tems and prefer to do their own spreading to get a better “feel” for a borrowing customer. Widespread use of this approach could result in a gen eral rejection of any standardized/ automated system. The depth of the analysis can range from a simple reproduction of financials plus a few key ratios to a detailed ratio analysis, trend analysis, common state ment, funds flow analysis, forecast and industry comparison. And the system can cover the full gambit of credits. Separate programs provide a more ac curate analysis for those industries— most notably the utilities, motor car riers and finance companies—that pub lish financials in a different format than do most manufacturing and service companies. Alternative uses for the program could also expand the scope of the sys tem. The AFA could be offered as a service to other banks which either do not have the resources to develop their own system or are unable to justify the expense. By the same token, AFA could become an effective bank service to corporate customers, especially in the area of forecasting funds flows. We have been experiencing a relaxation of resistance to such close scrutiny by a number of borrowing customers, espe cially with the increase in secured loans. A number of customers have been very enthusiastic about the oppor tunity to make use of the forecasting analysis. Such an attitude is beneficial to both sides of a credit and usually re sults in a stronger relationship with the customer. Other potential outside users of the system might include investment bro kers, life insurance companies, rating services and a number of other finan cial institutions. An important area within the bank that actively makes use of the funds flow forecasting tool is the workout section. Here the application helps an swer some of the questions of when and how large a paydown of a loan can be expected. Such analysis can influ ence the decision about pumping new funds into a situation in anticipation of a more successful return of prin cipal. The data base created also provides the opportunity to generate additional internal management and operations reports. A few examples of these would include an internal loan rating system, an internal loan auditing system, a scan for RMA input filings, a non-borrowing customer list for marketing purposes, a term loan compliance report, a state ment overdue report for loan adminis tration and any number of additional applications. Once the initial base re port and the data base are established, many of these additional reports can be relatively easy and inexpensive to generate. Scope— technical. Once management has established a level of commitment, there is a seemingly limitless variety of technical alternatives available in volving trade-offs among speed, com patibility and flexibility. It might prove helpful to highlight a few major areas for consideration. The design o f the data base is the first area. A larger data base retains greater detail and is more expensive to maintain. But it allows greater flexibil ity to create additional management FARMERS GRAIN AND LIVESTOCK » The Marketing Advisory Service FGL W ill Help You . . . 1. Increase the volume of your loan portfolio. 2. Increase profitability and stability. 3. Develop credibility and leadership in the ag community. 4. Provide marketing expertise to your Clients. G IVE FGL A CALL . . . (515) 223-2200 1200 35th Street, West Des Moines, Iowa 50265 54 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis MID-CONTINENT BANKER for June, 1977 How to lick your m oney order processing problem s. 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We always deliver the club and premium promotions you need, when you need them. Call (800) 523-9440, toll free and see. We promise fast service. chRiscmas C l u t > a corporation P.O. Box 20 Easton, Pennsylvania 18042 56 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis or operational reports and corporate services and to tie in with other exist ing bank programs. Additional flexibili ty is made possible through the use of flexible input categories to customize reports for peculiar corporate structures within industry groupings. D ata storage can be handled by tape, disc or drum. The trade-offs here are fairly straightforward among speed, capacity and expense. But the storage mode is often determined by the on-line or off-line capacity of the system. On-line vs. off-line systems—The more expensive on-line system ties up computer capacity and is usually only economically feasible if the system is shared by a number of users. Such op erations are usually not compatible with the other operations on a bank’s main-frame computer. An off-line sys tem is more likely to be compatible be cause it allows the processing of AFA work to be scheduled around the more time-critical functions of the main pro cessing unit. A key-to-disc data entry system can be a helpful instrument during the in put stage. Because it is minicomputerbased, balancing and editing routines can be programmed to carry out some basic checks on the input and ensure that only “clean” data are entered into the AFA system. The cost of this addi tional step is likely to be offset entirely by the savings in processing costs of in correct reports, which must be rerun after correction. The program m ing itself and how much flexibility can be written into the system is a final major technical con sideration. The ability to modify a pro gram in a changing environment and to generate additional reports from an existing data base is largely a function of the design principles and techniques employed by the programmers. Their clear understanding of the functional logic of the whole system makes this possible. It is well worthwhile to assign this project to top computer analysts and invest the time to educate them in financial analysis to assure the system will be flexible. It follows that management must have an appreciation of the technical as well as the nontechnical trade-offs in order to get the most out of their in vestment in such a project. The degree of their commitment to the program should depend upon both the frequen cy and importance of the program’s use. The cost and adaptability of its implementation are also considerations. If user needs are not great, then per haps these capabilities should be pur chased outside the bank, thereby avoiding the substantial fixed develop ment and operating costs. The introduction of the new auto mated system actually begins with strong user involvement in the organi zation of the project. During the en suing system development, continued interaction between the programmers and the users will foster greater mutual acceptance of the AFA. Of equal importance is the planning of the actual physical transition, for a sloppy transition can inhibit the ulti mate acceptance of the system. Plan ning must be thought through for re sponsibility, staffing, work-flow, man uals and internal promotion. The organizational responsibility will undoubtedly vary from bank to bank, but should rest within the realm of the users. It will be the users who will ini tiate any improvements or modifica tions when required. And if the users are paying for the system, they will take more interest in its being accurate and current. Credit staffing changes. The changes in clerical staffing will depend upon the existing talent available in-house. The more sophisticated output will require more thoughtful input, thereby giving rise to an upgrading of some of the existing staff. The computer processing of the analysis should require no new expertise or additional personnel than is employed for the generation of any existing computerized bank reports. There are only two groups, both on the credit end of the system, where staffing changes may be required. These credit staffing decisions would necessarily be handled on a case-by-case basis. The first group affected is the credit analysts. Although the substance of their task may not change significantly, the discipline of spreading is substan tially greater. The report requires that certain entries be registered on certain lines of the input form for the correct generation of ratios and especially for an accurate funds flow analysis. The credit analyst is responsible for assur ing consistent treatment of all account ing principles. Footnotes must also be read with greater care to determine the appropriate classification of a given nu merical item, and the important foot notes must be understood and sum marized on the input form. These new demands on the credit analyst may re quire more in-depth accounting train ing, but the key factor is the increased emphasis on a more disciplined ap proach to the application of the num bers. The second group requiring credit staffing changes is the operators for data input terminals. Normally these operators will exist within any bank using computer systems, but even if they are a part of the staff they will have to be fully indoctrinated in the MID-CONTINENT BANKER for June, 1977 D urham L ife’s new Low 100. D esigned especially for mobile home loans and second m ortgages, th e fa ste st growing p art of th e m ortgage loan business. We call it the Low 100 because premiums are lower for th e borrower, b u t you g et 100% protection. You’re paid back th e entire unpaid balance n et of unearned in terest and finance charges, y et you can offer your custom ers lower m onthly paym ents. We keep the premiums low by fully covering your exposure and no more. One premium is charged regardless of age. T he entire premium is paid a t one tim e, elim inating paper work, collec tions and policy lapses. And no medical exam is required. W ith all th is you still g et th e same attra ctiv e com m ission plan. T he Low 100. One more policy in D urham L ife’s complete line of credit life. E v ery th in g you’ll ever need. Call D an Boney. Durham Life Durham Life Insurance Company Home Office: Raleigh, N.C. 27611 P.O. Box 27807, Tel. 919/782-6110 MID-CONTINENT BANKER for June, 1977 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis new system. These terminal operators are critical to the smooth operation of the system since they are the interface between the computer and the credit people. They are responsible for catch ing any errors of their own or of the credit analyst to whom the input form would then be returned for correction. The terminal operator will receive a maintenance report, where many auto matic balancing and checking routines will identify errors, as well as any num ber of other reports for distribution once they have been cleared for ac curacy. In short, the key job of the terminal operator is one of quality con trol. One important element in deciding the level of expertise required both for the credit analysts and the terminal operators is whether the system is on line or not. An on-line time-sharing system is considerably more expensive to operate and its effective use requires consistently accurate input that will not consume extended periods of time for corrections. This high quality input to the system requires more talented, more highly trained and therefore more expensive personnel. Other requirements for acceptance. Clear and accurate manuals should be available well before the system is brought on-stream. These manuals should be written for users and for the operating staff and should be thorough ly understood by each group as imple mentation begins. Forms will have to be made up, and they should not differ significantly from forms used for credit analysis before the advent of AFA. The benefits of similarity are as important for the input forms, where the training requirements can be reduced, as for the printout where familiarity with the format will strongly influence the level of initial acceptance by the users. The work and paper flow is merely a mechanical exercise, whose results will depend upon physical layouts and the vehicles available for transmission of information and materials. Any deci sion here would obviously affect the speed of delivery of analyses and re ports and would be influenced by the user’s requirements. The actual implementation of the system should be immediately preced ed by seminars and demonstrations to explain the output and how it might be applied to credit analysis. A little bank-wide publicity might also be ef fective. It is imperative at this stage that the program be com pletely debugged and ready for daily use. Any inconsistencies or outright errors at this stage would drastically affect the system’s credibili58 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis ty. There will be skeptics among the users, to be sure, who would jump at the opportunity to criticize this innova tion. And once lost, credibility could be very hard to reestablish. Buying outside or developing a sys tem in-house. All of the advantages of an AFA system can be available to any bank by purchasing the service from a vendor. A few banks will have the resources to develop their own system in-house. For the vast majority of com mercial banks, there are economic rea sons for purchasing the service. And for these same banks there exists the advantage of being able to shop for the best service on the market at the time. For those banks willing to commit the resources to tailoring their own sys tem, the considerations and require ments are many. The need for the sys tem depends upon the number, size and type of credits and the frequency with which they are analyzed. The scope of the system is a function of the mix of credits, additional proposed uses of the data base and the resources available to build the system. And the resources required include the person nel, hardware, capital and most impor tant, management’s commitment to an automated financial analyses system. If the final analysis of these various ele ments indicates that a bank could and should develop its own system, then the time is right for such a move. The availability of computer and personnel resources in many banks and the new standardization and disclosure require ments for public companies have made AFA feasible. Proper planning and project staffing a must. Proper in-depth planning and project staffing (including capable and fully committed user participation) of the original development team will di rectly affect the project throughout the development and into the actual ac ceptance of the system. Without a good conceptual grasp of the project, there can be cost overruns, numerous pro gramming changes, inadequate person nel training, poorly coordinated user involvement, inaccuracies in the final program and an ineffective promotional effort. The importance of the end prod uct to the basic function of the bank requires a total commitment to the project’s success. And this commitment can result only from a well-conceived system and development plan, imple mented by a highly skilled and moti vated development team. Ultimate benefits to the user. The advantages of a flexible, well-written program and a competent and orga nized staff to run it can be many. There are clerical efficiencies, saving cost and time while improving the ac curacy and uniformity of credit analy sis. There are the dynamics of a good system, involving new means of looking at credit through an emphasis on cash flow and forecasting analyses. And a sophisticated data base can provide the foundation for other MIS reports, as well as valuable new customer services. Although this management informa tion system, like most others, is not easy to cost-justify over and above some clerical savings, the ultimate benefits to the user can be significant to the bank’s bottom line. The end re sult of this system, properly used, is to give the commercial lending officer a dynamic and more accurate tool with which to analyze a credit. Such analy sis should result in a more appropriate structuring and pricing of a loan, a more efficient monitoring of a compa ny’s performance and ability to repay borrowed funds, an earlier recognition of bad credits, and, ultimately, a re duction in that all-important loan-loss account. * • Nat I Stock Yards to Liquidate; Boatmen s Nat l of St. Louis To Acquire Correspondent Div. Boatmen s National, St. Louis, and National Stock Yards National, National City, 111., have reached an agreement whereby Boatmen’s will acquire the correspondent division of National Stock Yards, which intends to liquidate, through assumption of deposit liabilities of that division and purchase of re lated assets. National Stock Yards’ correspondent division consists of more than 600 correspondent bank relationships, which will continue to be serviced as in the past until approval for the move is received. The correspondent bank de posits exceed $150 million. According to a National Stock Yards spokesman, the decision to liquidate the bank as a whole was made by its directors in carrying out the wishes of the institution’s principal stockholders. It was emphasized that the bank’s fi nancial condition is “extremely strong” and that the remaining bank deposits— exceeding $13 million—will be assumed by First National, East St. Louis, 111., after it receives permission to locate a facility in National Stock Yards. Spokesmen of Boatmen’s and First of East St. Louis say that present personnel of National Stock Yards will be retained to staff the resultant di vision/ facility. MID-CONTINENT BANKER for June, 1977 Now is the time to ex pand home improvement loan volume. H ere are six reasons w hy... ICS, the w orld's leading insurer of home im provem ent loans, believes current econom ic conditions provide an excellent climate to increase your HIL volume and profits. 1 Stable Diversification. Consumer HIL d e m a n d c o n and the t im in g is p e r fe c t for in in creased loan activity in this category. Loan volume in other categories such as autos, boats and rec vehicles is adversely affected by possible energy shortages and inflationary price increases. 4 Higher yield. Your profits are being squeezed by ^spiraling costs and can be offset by a h ig h y ie ld h o m e m o d e r n iz a t io n p la n . An ICS program assures that your gross income will be higher than that re ceived from FHA auto and mobile home loans. Let us demonstrate how an ICS insured program will provide a d r a m a t ic in c re a s e in p r o f it s on a pri vately insured portfolio compared to FHA coverage. 100% home im /o Credit Protection. ICS insured insu Improvement provement loans enjoy 100% 100 % credit protection. And we in c lu d e e v e ry u n p r e d ic t a b le d e f a u lt . . . such as layoffs, recession, strikes, bankruptcy and divorce. Other loans, by comparison, put the entire burden of risk on you. fectively cross-sell all banking services. The home owner is a ready-made and growing audience for promotions that provide useful and innovative home modernization ideas. Since 1954, ICS has accumulated a w id e v a r ie ty o f e f f e c tiv e h o m e im p r o v e m e n t p r o m o t io n s th a t a re o f f e r e d e x c lu s iv e ly to o u r m o r e th a n 1 1 0 0 c lie n t b a n k s . to tin u e s t o g r o w 2 Opportunities. tvery Every home Unlimited Marketing Opportunities, |0 ^ improvement loan provides the opportunity to ef Increased home modernization activity. There 5 # couldn't be a better time to emphasize home im 5 provement loans. Because of inflation, people are in v o lv e d in d o - it - y o u r s e lf p r o je c ts and are constantly aware of needed improvements. Also high mortgage rates make HIL more feasible from an economic standpoint. m o re 6 Community iService. The home owner is the "back£_ bone" of the community. T h e re is n o b e t t e r w a y f o r y o u r b a n k t o m a k e a c o n s tr u c tiv e c o n t r ib u t io n to c o m m u n it y s e rv ic e than the active promotion of programs for financing the maintenance and im provement of property! 6 reasons why n o w is the time to expand your home improvement loan volume. Call or write William F. Schumann, President, for personalized ideas applied to your situation. As the world's largest home improve ment loan insurance service company, our expertise will help you achieve your profit goals. IN S U R E D C R E D IT 307 N. Michigan Avenue Chicago, Illinois 60601 312/263-2375 America's No. 1 insurer of home improvement loans. MID-CONTINENT BANKER for June, 1977 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 59 Discussed at NABD National Conference and liabilities of bank directors was the general theme of the first annual Bank Di rectors’ National Conference, held in New Orleans last month under the sponsorship of the National Association of Bank Directors (N A BD ), headquar tered in Washington, D. C. In discussing why a national meeting of bank directors was needed, NABD President James W ebb Jr. pointed to the changing times that have brought new responsibilities and liabilities to bank directors. Mr. Webb, who is chair man, Nashville (Tenn.) City Bank, cited—as an example of the changes buffeting banking—the states that are considering organizing bureaus to moni tor consumer complaints of all types. “I’m a consumer, too,” he said, “and interested in the rights of consumers, but none of us needs another layer of bureaucracy to beseige us with paper work and forms to complete, to bom bard us with reports going and coming and generally justify their existence by living off the public.” He said banks and bankers make good targets today because they have high profiles in their communities, be cause money is their stock in trade, and they make good subjects for generaliza tions such as: banks make too much money, banks charge too much interest, R e s p o n s ib il it ie s banks are not equitable to the small customer, etc. “We are either inspected or regulat ed or both by national and state bank ing laws,” he said, “by the Comptroller of the Currency, by the FD IC , by the Fed, the SEC, OSHA, ORISA, EEO C and the IRS. Now the FT C is trying to get into the act, too. W e are targets of frivolous lawsuits of all kinds and are good ‘class action’ material for bounty-hunting attorneys. W e are good editorial copy and front page material when we make mistakes or have prob lems, and recently we have even be come good copy for movies and books. “In short, we are in the spotlight and will probably remain there the rest of our business lifetimes. With so much regulation and red tape, honest mis takes will occur, and this meeting will be dedicated to assisting all bank di rectors, both inside and outside, in recognizing what the problems are and how to steer a proper course through the rocks and shoals of today’s and tomorrow’s regulations.” Speaking on the topic of the expand ed responsibility of the board audit committee, Martin F. Mertz, partner, Peat, Marwick, Mitchell & Co., New York City, stated that efforts of “pro fessional” stockholders and the pres sures of class-action suits have made Program participants at first annual Bank Directors' National Conference, sponsored by National Association of Bank Directors last month, included (from I.) Dr. Lewis E. Davids, editor. Bank Board Letter, St. Louis-based newsletter for directors; Dr. Paul Nadler, professor of banking and finance, Rutgers University, New Brunswick, N. J.; Dr. Maurice Mann, pres.. Federal Home Loan Bank of San Francisco; and Martin F. Mertz, partner. Peat, Marwick, Mitchell & Co., New York City. Dr. Davids is Hill Professor of Bank Management, University of Missouri-Columbia. 60 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis NABD officers at conference included Jerome Twomey (I.), NABD ch., and pres., Sterling Nat'l, New York City; and James Webb Jr., NABD pres., and ch., Nashville (Tenn.) City Bank. the function of the audit committee wide-ranging, with no limit to the amount of probing it can carry out. He also said that the role of the di rector has been influenced by certain court cases brought under Rule 1 0 (b ) 5 of the Securities Exchange Act of 1934. These cases . have resulted in rulings making it illegal to mislead by either omission or commission and holding directors to be negligent if they know or should have known of any actions or possible actions detrimental to the interest of shareholders. He said bank directors bear a heavier responsibility than many of their peers in other industries, especially in the areas of self-dealing, interlocks and conflicts of interest. The past few years, he said, have seen a profuse number of new account ing rules and financial disclosure re quirements. Directors must keep pace with these rapid developments to dis charge properly their responsibilities in assessing the adequacy and fairness of financial information reported to share holders and supervisory authorities. “Everyone benefits from a properly organized and effectively functioning audit committee,” Mr. Mertz said. “The board receives assistance in fulfilling its financial reporting responsibilities, man agement has access to additional knowl edge and experience in the areas of fi nance and accounting, auditors have an important communication link with the board and the investor and other out side users of the financial information are assured that annual reports, interim statements and other financial data have received the careful consideration MID-CONTINENT BANKER for June, 1977 W hen it comes to D & O Protection, more financial institutions choose M G IC . Here’s why. 1. As a respected m em ber of the financial 4. M G IC also provides every policyholder w ith com m unity, we have used our expertise to create a policy that provides the most com plete range of coverage options specially tailored to meet financial institution needs. a quarterly copy o f Counsel— an M G IC newsletter w hich has now become one of the nation's most authoritative sources fo r loss prevention inform ation on D & O liability, cases, claims and activity. 2. We have available a fiduciary liability extension rider to protect fiduciaries o f your own employee benefit plans. The basic policy also includes protection for trust officers, including their exposure under ERISA. 3. M G IC provides 100% coverage above any selected deductible (except in New York State w here prohibited by law), enables you to select your own counsel subject to our approval - and at our option, can provide you w ith costly legal fee advances. MID-CONTINENT BANKER for June, 1977 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis It is this unique com bination that continues to make M G IC coverage the most desirable choice fo r all financial institutions. To learn more, simply contact your insurance broker or local M G IC representative. MGIC Indemnity Corporation Directors’ and Officers’ Liability Protection A Member of the MGIC I nvestment Corporation Family MGIC Plaza, Milwaukee, Wisconsin 53201 Phone 800-558-9900 Ext. 6648. In Wisconsin, 800-242-9275. 61 and approval of members of the board.” Dr. Lewis E. Davids, editor, The Bank Board Letter, St. Louis, and Hill Professor of Bank Management, Uni versity of Missouri-Columbia, told the audience that a truly effective board, as distinguished from a “rubber stamp” board, is the catalyst for not only the growth of the bank, but the dynamism of its community. He said that a well constituted and selected board will not have the prob lems or tribulations that a poorly struc tured board inevitably will face. “Directors know that claims against them in the last few years have been doubling every 18 months and this trend is not likely to diminish but rather accelerate as more disclosure and ‘sunshine’ is built into our entire society,” Dr. Davids said. “Certainly, such controversial con cepts and terms as ‘redlining,’ ‘faircredit,’ ‘truth-in-lending,’ ‘boycott,’ ‘non discrimination,’ ‘fiduciary,’ ‘materiality’ — even ‘generally accepted accounting principles,’ call for knowledgable and conscientious directors who are prudent but not necessarily supermen.” He listed a number of basic charac teristics that a director should have: • The capacity to work harmonious ly with other directors without giving up strongly held convictions. • Broad experience in business that is oriented toward the interests of the bank, yet possessing expertise in some specific area of business, such as insur ance, real estate, accounting, so better decisions can be reached. • A wide circle of friends and asso ciates who think favorably toward the bank because of their association with the director. • Good judgment that enables the director to contribute effectively to the decision-making process. • Loyalty to the bank. • A sense of salesmanship that is bank-oriented. • Conscientiousness about attending board meetings regularly and about doing homework about major bank problems. • Forward-thinking c a p a b ilit y so that long-range goals can be estab lished. • Fairness to everyone connected with the bank. • Imagination to keep innovation in the forefront. • A sensitivity to conflicts of interest so that sticky situations can be avoided. Banquet speaker Allan P. Stults, chairman, American National, Chicago, admonished directors to establish as their goals the “four C’s of Responsi bility”—to capital, to co-workers, to customers and to communities. In order to carry out one’s responsi bility to capital, he said, directors should be made aware of the planning necessary in four specific areas: reg ular updating of the inventory of the bank’s strengths and weaknesses, de fining objectives and setting target dates for accomplishments, evaluating results versus plans at specific regular intervals and developing management information systems to obtain data necessary for planning and evaluation. Directors’ responsibility to workers is to make a profit so the workers can keep their jobs and profit therefrom, he said. The policies and practices of man agement should enable each employee to reach his maximum potential. Their responsibility to customers is to find better ways of serving those who need bank services, he said. A directors’ responsibility to the bank’s community is to work toward equality among individuals and to help improve the environment. This is the area in which bankers have accom plished the least, he said, although some progress has been made. Among the bankers from the MidContinent area participating at the meeting were Pat Moore, president, American; State, Thomas, Okla.; Charles L. Daily, chairman, Edgemont Bank, East St. Louis, 111.; and Robert Porter, president, Planters Bank, Forrest City, Ark. • • CONSULTANTS TO FIN A N C IA L INSTITUTIONS ABA Stands Up (Continued from p ag e 26) W e design the function first and then encase your operation in a building that reflects the Bank's commitment to the strength and progress of the com munity. 20180 GO VERNO RS H IG H W A Y 8111-B NO. UN IVERSITY 62 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis IBBC O L Y M P I A FI E L D S , IL L. 6 0 4 6 1 P E O R I A , IL L. 6 1 6 1 4 312/481-2800 309/692-2625 “For example,” he said, “what ra tionale is there in suggesting that NOW accounts be the only form of interestbearing transaction accounts, other than to put the kibosh on such innovations as credit union share drafts and tele phone billpayer accounts? “I could never agree to this . . . ,” he said. He also said the ABA deserved credit for supporting NOW legislation. He pointed out that the trade association “had a difficult job indeed” in attempt ing to represent the views of its entire membership. The ABA has gone on record that it will not alter its package of require ments without first consulting the bank ing leaders who drafted the original plan. * • MID-CONTINENT BANKER for June, 1977 Banks all over thef tSouthw est bank o llo C Republic National Bank is ^ # 1 1 f t ^ d l l d w B t h e major reason why. Dallas itself has been a major factor in our growth in correspondent banking. The city’s central location in the Southwest and its excellent distribution, mail and transportation services make correspondent banking transactions faster and much more efficient. But there’s more to our leadership in correspondent banking than our location. Much more. It’s an attitude of service. For example, through Republic, you can offer your customers a full range of international.banking services. And be assured that they will receive the quality of service that you would provide were you based in London or Tokyo, or Hong Kong or in any one of a number of other strategic international business centers. That attitude extends to each of our correspondent banking services. You can take advantage of our superb trust department, yet maintain full control of your customer’s account. Your customers involved with oil properties will especially M i benefit from the services of our highly respected petroleum and minerals group. Naturally, we can provide virtually any banking service that you and your customers may need, from transaction services Wm » ¡M I to credit facilities. ________ In helping our correspondent banks grow, we’ve made Dallas the correspondent banking center of the Southwest. And Republic National Bank/s Dallas. Republic National Bank is Dallas. MR Member FDIC MID-CONTINENT BANKER for June, 197 7 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 63 Make Branching Consumer Issue, AMBI Members Are Advised; Loren Smith Named President By ROSEMARY McKELVEY M anaging Editor EG ISLATION , both state and na tional, was spotlighted during the fourth annual convention of the Asso ciation for Modern Banking in Illinois (AM BI) at Chicago’s Continental Plaza Hotel last month. The association was founded to bring about structural changes in the state’s banking laws, and members were encouraged by two actions taken in the Illinois General Assembly just prior to the convention. The House Financial Institutions Com mittee endorsed establishment of re gional multibank HCs (HB 4 9 2 ), and the Senate Finance and Credit Regu lations Committee approved a bill to allow limited branching (SB 1015). According to an AMBI spokesman, HB 492 would permit small banks to group together while retaining local officers and directors to provide greater services based on their combined as sets. No bank in any of the five geo graphic regions would be allowed to L acquire more than 15% of the assets of its region. At press tim e, MCB editors learned that both th e m ultibank HC and bran ch ing bills presum ably are d ea d in this session o f the Illinois G eneral Assembly. H ow ever, they m ay b e brought b a c k in 1978. However, no AMBI member believes the struggle to get new banking laws is over. In conversations between busi ness sessions and in talks by conven tion speakers, the theme was one of continuing the fight, of getting the pub lic to want the new legislation, too. In fact, according to Representative Mi chael Brady, sponsor of the branching bill in the House, the proposed legisla tion “is not a banking issue; it’s a con sumer issue. Until we get that message across, we can’t get branching in Illi nois. So, make it a consumer issue.” On the federal legislative level, the speaker was Gerald Lowrie, executive director of the ABA’s Government Re lations Council. He reported on two banking leadership meetings held by New AMBI officers are presented at convention's last business session. L. to r., they are: ch., Gerald Sinclair, e.v.p., Salem Nat'l; pres., Loren Smith, ch.. United Bank of Illinois, Rockford; v.p., H. L. Edwards, pres., First N at'l, Evanston; sec., Richard M. Bishop, pres., First Galesburg Nat'l; and v.p., William E. Weigel, e.v.p., First Nat'l, Centralia. At lectern In background is W alter R. Lohman, eh., AMBI nominating committee, and pres., First Nat'l, Springfield. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Plaque commemorating Gerald Sinclair's year as AMBI pres, is presented to him by W alter J. "Jack" Charlton (r.), pres., First Trust, Kanka kee. Mr. Charlton helped found AMBI about four years ago and was its first pres. Among those at head table during AMBI con vention luncheon are (I. to r.): John H. Perkins, newly designated candidate for ABA pres.-elect for 1977-78, and pres., Continental Bank, Chica go; Gerald Lowrie, exec, dir., ABA Government Relations Council, Washington, D. C.; and Ger ald Sinclair, AMBI pres., 1976-77. his association—one in February and one late in April. The questions of greatest concern to those at both meet ings, according to Mr. Lowrie, boil down to fair treatment for bank cus tomers and banks. Participants in the meetings directed the ABA to make an all-out effort, on behalf of bank cus tomers, to obtain full competitive equity with thrift institutions. They further directed that, as a part of this effort, the ABA should support legis lation that would give banks and other depository institutions the option of of fering consumers the opportunity to write checks on a new type of savings account. Although this type of account is called a NOW (negotiable order of withdrawal) account, the ABA would like to apply a new name to this con sumer service, one the public can understand better. So far, no such name has been agreed on. This effort to achieve parity for bank customers and banks is a new thrust Gerald Sinclair (2nd from I.), outgoing AMBI pres., presents gavel of office to new pres., Loren M. Smith. Between two men is Lester A. Kassing, outgoing AMBI ch. At I. is James B. W att, e.v.p., AMBI, Springfield. for the ABA, said Mr. Lowrie, who added that the association is challeng ing the game plan of banking’s com petitors. He pointed out how these competitors—S&Ls, thrifts and credit unions—have been gaining all kinds of new transaction powers through fed eral and state regulations, state legis latures and the marketplace, while Con gress has remained out of it. Yet, he added, the only place bankers can turn to is Congress. However, he warned, no one is sure how banking will fare with the 95th Congress, 60% of whose members have never served in Congress when the President has been a member of their party and whose leaders in both houses have never served when the President has been a member of their party. Although legislation was an impor tant part of AM BI’s convention pro gram, it was not the only subject dis cussed. For instance, David E. Ma guire, vice president for corporate per sonnel services at Chicago’s Continental Bank, talked on “Striving for Manage ment Excellence—P e r fo r m a n c e A p praisal for Your Management Team.” Mr. Maguire described formal and informal appraisal systems. He also said that a performance appraisal exists to improve performance and that per formance is improved by improving the “fit” between a person and an organi zation. To improve this “fit,” he con tinued, one must know the organiza tion and its people. Mr. Maguire advised his listeners to write a formal appraisal and to include in it an evaluation of an employee’s performance, his area of responsibility, results he obtains, his strengths and his weaknesses. Then, the appraisal should be discussed with the employee, but he should not read it unless the supervisor’s relationship with the em ployee is poor. In that case, said Mr. Maguire, the employee should read and sign the appraisal. In Mr. Maguire’s opinion, an in formal performance appraisal is the “guts” of a working relationship with a supervisor’s people. He posed three questions for supervisors: 1. How do you allocate your time? That is, whom do you spend your time with on the job? Whom do you have coffee with, talk to or visit with after hours. Who initiates actions in your de partment? Can your people do some of the initiating, or do you do it all? What issues open the door to your office? That is, do you have pet projects that get your attention more than others do? 2. How do you talk to people? Do you always tell your people what to do, or do you sometimes ask them to do things? What kinds of questions do you ask of your employees? How do you react to the answers? 3. How do you listen to people? What kind of attention do you pay to what your employees say? Do you ac cept their ideas? Are you able to turn an employee off without offending him when he takes too much of your time? E FT S. No convention would be com plete these days without a discussion of E F T S. The subject was handled at the AMBI meeting by former Comp troller James E. Smith, now executive vice president, First Chicago Corp. He said there’s a good prospect for a con sensus position on E F T S legislation W alter J. Charlton (I.), pres., First Trust, Kanka among financial trade groups, including kee, and Donald V. McCann, pres., First Bank those representing commercial banks, of Meadowview, Kankakee, do some "home S&Ls and credit unions. He advised w ork" between AMBI convention sessions. commercial banks to work more effec tively and arduously with their col leagues to bridge gaps of misunder standing. Mr. Smith pointed out that the stewardship and management of the payments system has been exclusively that of commercial banking. He then warned his listeners that if “we don’t bring our management know-how to the leading edge of this system, we stand a grave risk of having marketing practices put into operation by ama teurs. Some of these practices may prove to be unsustainable, and then we William C. Harris (I.), new liinois banking com (bankers) will have to undo them.” missioner, visits with Glen W . Ramshaw, v.p., The former Comptroller also noted correspondent banking dept., Continental Bank, that the banking industry has as great Chicago, during AMBI convention break. a herd instinct as any group in this country and backed this statement up by pointing out how many bank of ficials believe they have to jump into something, including E F T S, all at once. Other convention subjects included bank profitability, trust department profitability, trends in officer compen sation and how to become a highperformance bank. N ew Officers. Gerald Sinclair, ex ecutive vice president, Salem National, Gerald Lowrie (c.), exec, dir., AEA Government Relations Council, Washington, D. C., engages moved up from AMBI president to in convention recess conversation with Ralph chairman, succeeding Lester A. Kassing, W. Babb (I.), supervisor, Peat, Marwick, Mitchell president and CEO, Jefferson Trust, & Co., St. Louis, and James B. W att, e.v.p., AMBI, Springfield. Peoria. Newly elected officers are: president, Loren M. Smith, chairman, United Bank of Illinois, Rockford; vice presidents, William E. Weigel, execu tive vice president, First National, Centralia, and Harland L. Edwards, presi dent, First National, Evanston; treasur er, A. D. Van Meter Jr., president, Illi nois National, Springfield; and secre tary, Richard M. Bishop, president, First Galesburg National. • * ' sis**. Two officers of First Nat'l, Morris, enjoy coffee break during AMBI convention. Betty Buzzard, bank cash., is at l.| Beverly Greenwood, exec, asst. & a.c., is at r. Representatives of two Centralia banks are pictured at AMBI convention. At I. is Ben Ober, ch. & pres.. First Nat'l. At r. is Paul T. Mould ing, e.v.p., First State. MID-CONTINENT BANKER for June, 1977 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis HE ISSU E of interest-bearing check ing accounts held the spotlight at the 87th annual convention of the Mis souri Bankers Association, held at the Crown Center Hotel in Kansas City last month. The issue was thoroughly aired by convention speakers, including Willis W. Alexander, ABA executive vice president; Alfred R. Naunheim, ABA state vice president, and president, Charter Bank of Overland; and out going MBA President Charles K. Rich mond, vice chairman, American Na tional, St. Joseph. President Richmond made the point during his president’s address that the once inalienable right of banks to ex clusively provide third-party payments through checking accounts is rapidly eroding. “To add to our problem,” he said, “the willingness of the thrifts to allow third-party payments from interest-bear ing accounts puts additional pressure on banks with their interest-free de mand deposits. The concept of paying interest on so-called transactional bal ance (demand deposits) has been taken up with alacrity by many academic economists and economists serving on congressional staffs, committees and governmental agencies. All of their learned writings promoting paying in- T By JIM FABIAN Associate Editor Outgoing MBA Pres. Charles K. Richmond (I.) and Conv. Ch. Don V. Thomason, e.v.p., United Missouri Bank, Kansas City. terest on transactional balance has spurred on the movement. “It appears then that we will be faced with a federal legislative issue to which we must address ourselves and we should try to be unemotional and practical in our deliberation. Although I have been strongly opposed to the con cept of the payment of interest on de mand deposits, I am now willing to take a hard look at the pending proposal for several reasons. Newly elected MBA officers are (from I.) S. K. Turner, pres., First Nat'l, Kirksville—treas.; Pat Lea, pres., First Nat'l, Sikeston—v.p.; and Mills H. Anderson, pres., Bank of Carthage—pres. 66 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis “I still do not like the idea, but I do think this concept may be the least of the possible evils which could be im posed on us by a Congress that seems to be determined to make changes in our financial system. As I understand it, the NOW account proposition being considered would apply only to house hold accounts, the interest rate would likely be significantly less than the 5% maximum rate on passbook savings and it would require customer initiative to establish such an account.” Mr. Richmond said that the impact of the profit loss occasioned by pay ment of interest on checking accounts might be softened by a more realistic pricing of bank services. He stressed that no bank would be forced to offer NOW accounts should enabling legislation be passed and he said he expects that many banks will choose not to offer such accounts. He said he is also convinced that a great Willis W. Alexander, ABA e.v.p., spoke to convention about ABA's plan to support inter est-bearing c h e c k in g accounts that would be similar to NOW ac counts. many thrifts and credit unions would not be interested in offering such ac counts. “My second and stronger reason for considering any proposed NOW ac count legislation is that this may be banking’s best opportunity to obtain . . . equity with other financial institutions in such areas as allowable interest rates, reserves and regulations,” Mr. Rich mond said. “The ABA has suggested some stringent conditions which should be met if banking is to support this legislation.” He said there always seems to be issues that tend to pull bankers apart, but everyone should be able to agree that all financial institutions should play the game by the same rules. “If we are going to have any say in what changes are made and how, we must have a reasonable and justifiable position,” he said. He urged that bank- MID-CONTINENT BANKER for June, 1977 “O ur bank is a family bank and always has been. And w e look to the First for help just like one of the family.” The Farmers Bank of Blairstown, Missouri is a true success story. A correspondent bank relationship has added financial strength and a team of specialists. The Whitaker family, two and a sister, continue modem banking into the second family on. They understand and customer’s personal and in the best traditions! , small In a town with a 161, their customers are their friends and neighbors. And they can give them most services they might require. But the Whitaker family bank has a correspondent relationship with the First National Bank of Kansas City to help them handle those services their customers may need from time to time that they cannot give. Together, with the First, the Farmers Bank of Blairstown has the added strength of both economic and manpower resources. If your bank could benefit from assistance with overline loan s," investments, transit collection, bonds, international services, trusts, cash management and other financial services, call the professional staff of the First National Bank Correspondent Depar t ment . * ■ .‘. l „. ■ We take pride in the success of the Whitaker family and the Farmers Bank of Blairstown. , ' ; , Our correspondent banking tradition has been built on becoming p artof the family. - V \ Why not put our strong tradition of excellence to work for your success. 11 V. S. Whitaker, lYesieient Jane W hitak^ p  i Assistant OftSiéér^l H. D. W h ite r. Executrm Vice Presided Y o u r success is o u r tra d itio n . An Affiliate of First National Charter Corporation MID-CONTINENT BANKER for June, 1977 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Member FDIC 67 Members of MBA 50-Year Club attended annual luncheon meeting during convention. ers try to reach a consensus on the is sues, work toward obtaining candidates of the highest caliber to run for office and maintain individual contact with legislators. Mr. Naunheim discussed the ABA’s position on NOW-account-type ac counts, quoting from a talk given by ABA President Liddon McPeters at the recent ABA spring meeting at the Greenbrier Hotel in White Sulphur Springs, W. Va. Mr. McPeters is presi dent, Security Bank, Corinth, Miss. He stressed the fact that the ABA’s position was arrived at without pressure from the national office. The meeting at which a consensus was achieved was attended by a broad selection of bank ers from throughout the nation. The willingness of ABA to give con sideration to favoring legislation au thorizing a NOW-type account rep resents a compromise, since banking does not have a perfect situation, he said. Mr. McPeters was quoted as say ing, “Don’t seek perfection; seek some thing that works!” The consensus achieved by ABA at the Greenbrier spring meeting covers the following areas: • Parity in interest rate ceilings for all financial institutions. • The statutory interest rate differ ential must be removed from the In terest Rate-Control Act. • The NOW-type account must be the only interest-bearing transaction ac count offered by any financial institu tion. The account will take the place of existing accounts and no alternative ac counts will qualify. Earl York, state director, U. S. Savings Bond Program, St. Louis, presents outgoing MBA Pres. Charles Richmond with replica of Liberty Bell, honoring Missouri bankers for their efforts to promote U. S. Savings Bonds. Mr. York rep resented Harrison Coerver, exec. com. ch., Mer cantile Trust, St. Louis, state savings bond ch. 68 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Three men were initiated into MBA 50-Year Club during convention. They are Syl Witte (I.), St. John's Bank, St. Louis; Nate Bassin (2nd from I.), Peoples Bank, Kansas City; and Robert Wirth (2nd from r.), Bank of Perryville. In center is Stephen J. Roy, commercial banking officer, First Nat'l, St. Louis, club sec. At r. is Jesse F. McCreery, Higginsville, club pres. Robert W. Crawford, MBA e.v.p., proposed government a c t i v i t y program during his re port. He called for leg islative vigilance on the part of MBA mem bers. • Reserves for the new type of ac count can be held in any correspondent bank by non-Fed member banks. Fed membership is not compulsory. • The new type account must be available to households only. • There will be a one-year transition period in all areas of the nation except the six New England states where NOW accounts are presently autho rized. • All financial institutions offering the new accounts will be subject to similar regulations and examinations. • The Fed and the F D IC should au thorize pre-authorized transfers between checking and savings accounts. (See page 25 for additional informa tion.) The new type of checking account is envisioned as a means of achieving par ity with competitors of banking, Mr. Naunheim said. Educational seminars are being scheduled in various cities to enable bankers to discuss the ABA’s position and to permit them to sound off on the aspects they don’t agree with. Two meetings are scheduled for the Mid-Continent area— Dallas on June 28 and Chicago on July 6. Mr. Alexander spoke of the new spirit in Washington, which includes the fact that stifling NOW-type ac counts is no longer one of the options available to banking. He admitted that the ABA’s discus sion on NOW-type accounts involved a distasteful issue and he reinforced the statement made by Mr. Naunheim that the ABA staff and leadership didn’t force the consensus decision. Mr. Alexander said the best course for banking to take is to go on the offensive to get competitive parity for Jack W. Carlson (I.) gave an "Outside View of Washington" a t MBA convention following ABA members' meeting, conducted by Alfred R. "Bo" Naunheim (r.), pres., Charter Bank, Over land. Mr. Carlson is with U. S. Chamber of Commerce. MID-CONTINENT BANKER for June, 1977 Expert préventive maintenance saves you tim e and money later. You know the value to you and your family of regular checkups at your dentist. A bit of preventive work now can save you from a whopping bill later on. A Mosler Service Contract also offers you preventive maintenance. Your equipment gets periodic check ups to keep it operating at optimum performance levels with a mini mum of costly downtime. And if ¡gil an unusual malfunction does W :' occur, it’s reassuring to know there’s a Mosler Service Technician nearby, on-call 24 hours a day, everyday. Mosler service training is un equaled in the industry. That’s because every Mosler Service Technician receives hour after hour of “hands-on” training in our sophis ticated laboratories and classrooms. They even return regularly for graduate courses. Contact Mosler today about a service contract. It could save you a lot later. Write department S-l. Mosler An Am erican-Standard Company Hamilton, Ohio 45012 MID-CONTINENT BANKER for June, 1977 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 69 This year from B M A Sharpening your bank m arketing sk ills is a s easy a s 1,2,3... Conferences, 1 . seminars, workshops Annual 2 ■ 62nd Convention m October 30-November 2 Hilton Hawaiian Village Honolulu, Hawaii These educational opportunities have been scheduled in 1977 to enhance your bank market ing skills. . . "Managing Marketing for Profits." Come to this year's annual convention in beautiful Hawaii and find out how different a convention can be. We'll avoid generalities about the banking community in favor of an examination of practical day-to-day techniques for more profitable bank marketing. * Bank Marketing Seminar March 9 Kansas City, Missouri * KBA/BM A Bank Marketing Sem|É^Î gEte format will be varied, including general departmental, workshops, raps and ‘edui^tihnal displays. . .something for everyone. March 22-23 Wichita, Kansas * Research Conference ,Arkfiev^yone can come. In fact, there may be !$fiw4Ldfficers of your bank who will benefit f^^|»|& haging Marketing for Profits." If yc»fTe^wcerned about the costs, just remembeSfli&t'Wth a BMA package tour, it's actually ch^ m M » spend six nights in Hawaii than in San Francisco from most major April 3-6 Boston, Massachusetts * Community Bank Marketing April 20-21 Panama City, Florida * EFT Conference citBS?■ May 1-4 Cherry Hill, New Jersey Arra while the emphasis will be on learning and working, there'll be ample time to relax and enjoy the beautiful Hawaiian countryside. * Bank Librarians Conference May 1-4 Boston, Massachusetts * Bank Marketing Association/Wisconsin Bankers Association Marketing Seminar May 6-7 Oconomowoc, Wisconsin * Staff Sales Training Workshop May 15-18 Phoenix, Arizona * "H o t Topic" Seminar September 11-13 Atlanta, Georgia * Officer Sales Call Training and Train the Trainer Seminar September 25-27 Columbus, Ohio * Trust Marketing Workshop November 30-December 3 Miami Beach, Florida For more information call or write: t o BANK MARKETING ASSOCIATION 3 0 9 W E S T W A S H IN G T O N S T R E E T , C H I C A G O , I L L . 6 0 6 0 6 312/ 782-1442 70 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Schools To understand basic and more advanced theory, take advantage of these courses, offered throughout the year: * The Essentials of Bank Marketing Course March 15-19, University of Chicago May 22-27, University of Colorado, Boulder A basic overview of marketing and its relation ship to the overall operation of the bank * The School of Trust Business Development and Marketing May 22-27, In cooperation with the University of Colorado, Boulder Designed to teach an understanding and work ing knowledge of trust marketing and business development principles, and their applications * The School of Bank Marketing May 22-June 3, In cooperation with the Univer sity of Colorado, Boulder Designed to teach bankers how to develop the marketing function and apply effective market ing techniques * The Bank Management School for Marketing Managers August 13-19, University of Wisconsin An intensive program to train professional marketers in the overall management of the bank and advanced marketing theory. MID-CONTINENT BANKER for June, 1977 banks. If NOW-type accounts are neces sary to achieve this aim, he said, so be it, so long as the resulting interest-bear ing checking account is the only type of account authorized for all financial in stitutions. He reiterated the fact that the group meeting at the Greenbrier was broadly representative of ABA membership and included members of the government relations council, state vice presidents, leaders of state banking associations and leaders of other national bank organiza tions. ABA’s question to these represent atives was, “What’s best, given the situation?” Mr. Alexander said that studies show that the competition has been chipping away at banking’s cus tomer base for 15 years. It’s now ob vious that the competition has check ing account powers. Many of the com petition’s new powers have evolved through the channel of state regulation, he said. Mr. Alexander said the ABA had three options: • Do nothing for now, maybe take up the issue later, if the problem didn’t go away. • Stonewall the issue and put pres sure on Congress again as was done last year, even though banking would not have the support from other sectors that it had last year. • Work with all interested parties, including the Treasury, Congress and the Fed, seeking parity for all financial institutions. “No one knows if we’ll succeed,” Mr. Alexander said. “It’s up to you and. other bankers. But various recent hap penings point to a favorable climate for success. “We don’t like the competitive en vironment we seek,” he continued. “We often would rather fight among our selves and win rather than take on the competition. It’s all up to us whether we’re successful or not.” Mills H. Anderson, president, Bank of Carthage, was elected president of the MBA during the convention, suc ceeding Mr. Richmond, who, in turn, was elected to the ABA governing council for a two-year term, effective next October. Pat Lea, president, First National, Sikeston, moved up from trea surer to vice president, and S. K. Turn er, president, First National, Kirksville, was named association treasurer. Approximately 1,000 people attended the convention. • • ■ COM M ERCE BANK, Kansas City, has promoted Thomas L. Steffens from assistant vice president to vice presi dent/assistant sales manager, bond de partment; John G. Henderson from bond officer to assistant vice president, bond department; and Terence A. Mer- curio to assistant vice president, bond department. ■ EU G EN E A. LEONARD has joined Mercantile Bancorp., St. Louis-based bank HC, as senior vice president with responsibilities dealing with the HC’s affiliates. He had been first vice presi dent of the St. Louis Fed since 1971. At Mercantile, Mr. Leonard reports to the HC’s president, James E. Brown. Mr. Leonard joined the St. Louis Fed in 1961 as an economist, was named vice president and manager, Memphis Branch, in 1967 and senior vice presi dent in 1970. He spent a year as as sistant secretary to the Fed’s Board of Governors in Washington, D. C. LEONARD JEFFERSON CITY—Edgar H. Crist has succeeded William R. Kostman as Missouri finance commission er. Mr. Kostman resigned to rejoin Commerce Bancshares, Kansas Citybased multibank HC. Mr. Crist is a retired vice presi dent of the Federal Reserve Bank of St. Louis. ■ W ILLIAM R. KOSTMAN has been elected a vice president, Commerce Bancshares, Kansas City. He has offices in St. Louis and is responsible for di recting the proposed merger between Manchester Financial Corp., located in that city, and Commerce Bancshares. Mr. Kostman had been a vice president of the Kansas City-based HC before becoming Missouri’s finance commission er in 1973. He resigned that post May 17. Mr. Kostman holds a law degree from St. Louis University. ROGERS 0 JOHN P. ROGERS has been pro moted from assistant vice president to vice president, Mercantile Trust, St. Louis. He is in the personal banking department. ® JOHN H. FISC H E R has advanced from commercial banking officer to as sistant vice president, First National, St. Louis. H o w ard Cook Dies Howard Cook, 87, chairman emeritus, Central Trust Bank, Jefferson City, died May 9. He entered banking in 1905 at the then new Central Missouri Trust Co., predecessor of Central Trust Bank. His father, Sam B. Cook, was the bank's presi dent and had been Missouri secretary of state, 1900-1904. How ard Cook started as a part-time employee working after school, with his duties includ ing sweeping out the bank. He became afull-time employee in 1907, served in the infantry during World W ar I and returned to the bank to take over more and more of his father's responsibilities. He became president in 1931 following Sam B. Cook's death. In addition to banking, Howard Cook had a keeninterest in governmental affairs, and he was active in the Democratic party. It was said that he probably knew more Missouri governors than any other per son in the state. The Cook banking tradition is being carried on by a son of Howard Cook, Sam B. Cook, pres, of the bank. MID-CONTINENT BANKER for June, 1977 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis N e w Finance Commissioner ■ COM M ERCE BANCSHARES, Kan sas City-based bank HC, and Man chester Financial Corp., St. Louis multi bank HC, have reached an agreement in principle on merging Manchester Financial into Commerce Bancshares. Under the agreement, Manchester F i nancial would be merged into a newly created subsidiary of the Kansas City HC. Manchester Financial’s banking subsidiaries are Manchester Bank, St. Louis, and National Bank of Affton, a St. Louis suburb. ■ W ILLIAM J. HUHMANN has been advanced to executive vice president, First National Charter Corp., Kansas City-based bank HC. He continues as HC controller and assistant secretary. Dale H. Hudson was promoted from HC assistant controller to assistant vice president; James H. Slocomb was made assistant vice president, and Basil C. Benyo Jr. was elected assistant con troller. Mr. Huhmann is the company’s chief financial officer. Mr. Slocomb is a vice president in the investment di vision of First National Bank, Kansas City, the HC’s lead bank. 71 New Dimensions' Studied at KBA Convention; Varied Program Attracts 1,600 Bankers By JIM FABIAN, Associate Editor, and LAWRENCE W. COLBERT, Assistant to the Publisher T H E TH EM E of the 90th annual Kansas Bankers Association convene tion was “New Dimensions” and a varied program was offered to the 1,600 people who attended part or all of the three-day program. It was the first time KBA had held its~convention in Johnson County, the site being the Glenwood Manor Hotel in Overland Park. The convention saw the first awarding of the Arthur W. Kincade award, a visit to the Sacred Circles Indian exhibit at the Nelson Gallery-Atkins Museum, a carnival complete with dozens of game booths, a visit from the governor and a thorough examination of the ABA’s proposal to put banks in the NOW account busi ness. Notables on the program included J. Rex Duwe, chairman, ABA governing council, and chairman and president, Farmers State, Lucas; George F. Will, syndicated columnist; Governor Robert F. Bennett and four bank regulators: Emery Fager, state banking commis sioner; Roger Guffey, president, Kansas City Fed; Robert V. Shumway, FD IC regional director from St. Louis; and John R. Burt, regional administrator of national banks, Kansas City. Presiding at the convention was Floyd V. Pinnick, KBA president, and president, Grant County State, Ulysses. He reviewed his term of office during his president’s report and managed to give the audience numerous chuckles throughout the convention. Mr. Pinnick reported that E FT S “took its first walking steps in serving the Kansas public with Golden Touch cards, Via cards, the Moneymatic pro gram and various ATM programs.” He said MACHA (Mid-America Clearing House Association) has made important breakthroughs and is greatly improving its settlement schedule. “W e must remember,” he said, “that the automated clearing house is not a mature mechanism. Much has been done by devoted volunteers and by our Kansas City Fed in this ACH effort. However, it is important that senior bank management participate in im portant policy decisions during the next few years. . . . It is important that we support MACHA intellectually, spirit ually and financially. Remember, it is the broad highway that will carry E F T S .” He reported that Venture Capital, Inc., a statewide small business invest ment company, has been launched by the Kansas Development Credit Corp. New KBA officers pose with outgoing Pres. Floyd Pinnick (I.), pres., Grant County State, Ulysses. They are: Elwood Marshall (2nd from I.), pres., Home Bank, Eureka—KBA pres.; Francis E. Carr (c.), pres., First N at'l, Wellington—KBA treas.; and W. C. Hartley (2nd from r.), pres., Miami County N at'l, Paola—KBA pres.-elect. At far r. is Carl A. Bowman, KBA e.v.p., Topeka. 72 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Kansas Governor Rob ert Bennett was final speaker at KBA con vention. He spoke of projects being carried out under his adminis tration. (KD CC ) with the help of KBA’s com merce and industry committee. He said that more than $1 million in capital has been provided, making the new lending program fully authorized and launched. He said that most Kansas banks are participating members of the KDCC, which is the parent of Venture Cap ital. “I am convinced,” he said, “that with the advent of Venture Capital, Inc., a new and valuable tool is available to Kansas bankers and to the state’s busi ness and industrial community. Each of you should make yourselves thor oughly aware of its potential and should take advantage of the new resource. Many of us have asked for it, and now it’s here.” Mr. Duwe reported on the ABA’s ef fort on behalf of bank customers to obtain full equity with thrifts. Key factors in the effort are the ABA’s pro posal to give banks the option of of fering a new type of account that would provide for writing checks on savings accounts and interest parity for all financial institutions. Mr. Duwe said that nonbank com petition has been chipping away at banking’s powers over the years. Among the gains the competition has realized are pre-authorized bill paying, phone transfers from checking to savings, manned remote service units, full checking accounts, NOW accounts and credit union share drafts. He said it doesn’t make sense for bankers to debate the question of whether nonbank competition should have third-party power authority, since it already has it. He added that the competition has gained its new powers largely through decisions made by state-level regulators, with federal-lev el regulators following with similar regulations. MID-CONTINENT BANKER for June, 1977 Syndicated columnist George Will (I.) chats with outgoing KBA Pres. Floyd Pinnick during lull in convention program. Mr. Will's topic was "Government: the Disease for Which It Pretends to Be the Cure." Bankers can respond, Mr. Duwe said, by doing nothing and permitting the states to continue granting new powers to nonbank competitors; by taking a position of total opposition, which would be an unlikely way to achieve success; or they can keep their options open and work for competitive equality. ABA’s message to the financial in dustry is, “W e want parity for cus tomers and institutions. Our willing ness to play the game depends on the achievement of parity,” he said. Mr. Duwe listed the various com ponents for competitive equality agreed upon at the recent ABA spring meeting at the Greenbrier in White Sulphur Springs, W. Va. They include: • Parity of interest rate ceilings for all institutions. • Removal of the statutory interest rate differential from the Interest Rate Control Act and inclusion of credit un ions in the act. • Checkable Savings— the name pro posed for the new interest-bearing transactions account favored by ABA— must be the only such account offered by all financial institutions. • Reserves for Checkable Savings can be held by non-Fed members in any correspondent bank. Fed membership will not be compulsory. • Checkable Savings must be a household-type account, not available to corporations. • There must be a one-year transi tion period for the adoption of Check able Savings in all areas except the six New England states where NOW ac counts are presently authorized. • All financial institutions offering Checkable Savings will be subject to the same regulatory controls and ex aminations. • The Fed and the F D IC must per mit pre-authorized transfers between checking and savings accounts. (See page 25 for additional informa tion. ) Mr. Duwe said the ABA’s plan of fers the best hope for banks. He said the plan would enable all well-man aged banks ||to serve their customers well. In answer to the question of whether ABA can pull its position off, Mr. Duwe said the association has a good track record in skirmishes with Congress. He admitted that the consensus plan is not the perfect solution as far as bankers are concerned and that the ABA is sounding out bankers now to determine their “bottom line reaction’’ to ABA’s position. He stressed that no bank would be forced to offer Checkable Savings ac counts. Once these accounts were au thorized!! it would be up to each bank to determine whether it wanted to of fer them to customers, Mr. Duwe, representatives of the four bank regulatory agencies and KBA officers met with the press on the sec ond day of|fhe convention to discuss current banking issues. In response to a question about the state of E F T in Kansas, outgoing KBA President Floyd Pinnick said no one ex pected an overnight E F T revolution in Kansas. He said the development of E F T services in the state is an evolu tionary process. ACHs are making good, sound progress, he said, and only as the ACH service is practical will it be successful. E F T is proceeding as fast Principals at KBA press conference, held during convention, were (top photo) Roger Guffey (I.), pres., Kansas City Fed, and J. Rex Duwe (r.), ch., ABA governing council, and ch. & pres., Farm ers Stafte, Lucas. Bottom photo, from I.: John R. Burt, regional administrator of national banks, Kansas City; Robert V . Shumway, regional director, FDIC, St. Louis; and Emery Fager, Kansas state bank commissioner, Topeka. MID-CONTINENT BANKER for June, 1977 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis as expected and as fast as it should, he said. Mr. Duwe was asked about the cost to consumers of Checkable Savings ac counts. He replied that the cost will be borne by customers and that they won’t mind the additional cost if they are assured that they will not be dis criminated against by dealing with commercial banks. They are discrim inated against now, he said, because banks do not enjoy parity with their competitors. In response to a question about over regulation, Mr. Duwe replied emphat ically that banks are overregulated. He said Congress is to blame for the situ ation, not the people working as reg ulators. Every time Congress meets, he said, more regulations are put on the books. There is a danger that banks will become sterilized, he continued, if all the risks associated with banking are eliminated. “If a bank can make only blue-chip loans,” he said, “that’s sterili zation.” Mr. Guffey was queried about the Fed’s ag policy. He said that banks have a role to play to press farmers to sell their crops at depressed prices if necessary in order to get a cash-flow situation. Holding back crops puts too much pressure on ag-oriented banks, he said. The final session of the convention in- 73 Kincade A w a rd Given Members of KBA 50-Year Club assembled for luncheon during convention. Inductees into KBA 50-Year Club at conven tion included (standing) Ed Hess, First Nat'l, Dodge City, and (seated) Milton F. Barlow (I.), Johnson County Nat'l, Prairie Village, and Ward Hormel (r.), Cloud County Bank, Con cordia. Six other inductees were not present at convention. They are Gaylord McDonald, Central Nat'l, Junction City; Anita Souders, State Bank, Leon; Ferris Lohoefner, First Nat'l of Shawnee Mission, Fairway; Esther L. Hancuff, Kansas State, Holton; Roy Blythe, Peoples Bank, Pratt; and W. W. Chandler, Chandler Bank, Lyons. eluded a discussion of where banks are going and how fast, moderated by Mr. Duwe with the four representatives of the regulatory agencies participating as panelists. One question discussed during the session was whether or not bank of ficers are entitled to pocket the com missions from the sale of credit life in surance. Mr. Burt said credit life is a bank- related function and all shareholders have the right to share in the income generated by credit life. He said the proposed regulation requiring commis sions to be paid to the bank was prompted by minority shareholder suits being filed against personnel of na tional banks. He added that it’s permis sible for an officer to pocket credit life commissions if the board approves and if there is full disclosure of the arrange ment to shareholders, although the pro posed regulation does not so state. He said he did not know when the regula tion will become final. Mr. Fager added that it’s up to the directors to set policy, but the share holders should approve the policy an nually. If shareholders do approve credit life commission payments to bank officers, they have no grounds to sue later. He added that no favoritism should be afforded to a customer who buys insurance from a bank agency. New KBA officers were installed at the convention. They had been elected previous to the meeting. New KBA president is Elwood Marshall, president, Home Bank, Eureka. Installed as presi dent-elect was W. C. Hartley, president, Miami County National, Paola. Francis E. Carr, president, First National, W ell ington, is the new KBA treasurer. John O’Leary Jr., president, Peoples State, Luray, was elected to the ABA governing council for a two-year term during the meeting of ABA members. Mr. O’Leary succeeds William L. W eb ber, chairman, Security National, Kan sas City. * * The first presentation of the Ar thur W . Kincade Award to a Kan sas banker exemplifying certain lending practices was presented dur ing the KBA convention to Mrs. Myrtle Clinesmith, chairman and cashier, Peoples State, Coldwater. The $10,000 award was estab lished and announced a year ago at the KBA convention in W ichita. It was presented by Mrs. R. H. Garvey of W ichita, representing the family of the late R. H. Garvey, sponsor of the award. Conditions of the award stipulated that it would be given “to the Kan sas banker who has best exempli fied extension of credit on personal character and performance rather than material collateral.” Mrs. R. H. Garvey (I.) presents Arthur W. Kincade Award to Mrs. Myrtle Cline smith, ch. & cash., Peoples State, Coldwater. The award honors Arthur W . Kin cade, chairman emeritus, Fourth Financial Corp., W ichita, who helped Mr. Garvey obtain eastern bank fi nancing for terminal grain ele vators. According to Garth W . McMillen, president, Peoples State, Coldwater, who nominated Mrs. Clinesmith for the award, “Virtually every type of enterprise in our area has benefitted from Myrtle’s confidence in the in dividual. Farmers, ranchers, busi nessmen, consumers; all have sought Myrtle’s common-sense advice and support for their venture ‘with a loan from Aunt M ert.’ ” Mrs. Clinesmith joined her bank in 1944 and served as teller, book keeper, vice president and executive vice president prior to becoming chairman and cashier. We make trust & estate service easier for you! CNB _____ CO M M ER C IA L NATIONAL BANK Beraa,dRui,sser 6TH & MINNESOTA AVENUE • KANSAS CITY, KANSAS 66101 • 913 371-0035 • MEMBER F.D.I.C. 74 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis MID-CONTINENT BANKER for June, 1977 The little hotel with a lot of heart. Right in the heart of Chicago. When you stay in Chicago, you naturally want a great location. A place that’s near all the fabulous things the city has to offer. But that doesn’t mean you have to put up with one of those big, imper sonal hotels. Because just off North Michigan Avenue, in the heart of new Chicago, is a charming and elegant little hotel called the Seneca. Its location, quite frankly, is unmatched. Lake Michigan, with its holiday atmosphere, is just a few blocks east. Rush Street, with its famous and exciting night life, is MID-CONTINENT BANKER for June, 197 7 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis just a few blocks west. The John Hancock Build ing, and the new Drury Lane Theatre are nextdoor neighbors. And the loop is only minutes away. The Seneca 200 East Chestnut Chicago, Illinois 60611 312/SU7-89ÜÜ Even more important —the Seneca has heart. Its disposition is like that of an old friend. Guests are treated warmly, courteously, luxuriously—not with cold ritual. And there's a beauty shop, valet and fine restaurant right in the building. Plus all the usual hotel conveniences. So, next time you visit Chicago, get right to the heart of things. At the Seneca. 75 R e s o lu t io n p a s s e d t o c u r b s tr u c tu r e c h a n g e in it ia t iv e s HE SIM M ERIN G POT boiled over at this year’s Oklahoma Bankers As sociation convention, held in Tulsa last month. In a successful attempt to eliminate the likelihood of the OBA leadership from endorsing legislation calling for bank structure changes in the future, the leadership of the Independent Bankers Association of Oklahoma passed a resolution that precludes OBA direc tors from acting on branching and HC bills without first submitting proposed legislation to a mail vote of the mem bership. The resolution was voted upon by secret ballot and was adopted by a vote of 140-97. Opposing the resolution were the state’s larger banks. Opponents argued that the resolution would severely handicap directors in seeking needed changes in Oklahoma law to provide “relief” for banks in communities that seek to expand in outlying shopping center areas. In an attempt to seek such “relief,” OBA directors introduced a “bank mod ernization act” last March that would permit banks to establish a single branch within city limits with an un limited number of branches in bankless https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis By LAWRENCE W. COLBERT Assistant to the Publisher JACKSON MILLIGAN SHARBAUGH towns within 25 miles of the main office. The bill would also authorize multi bank firms in the state, with no one firm controlling more than 12% of the total bank deposits in the state. Independent bankers contend that the OBA should hold to strict majority rule principles in deciding policy. One large bank supporting the independents is Fidelity Bank, Oklahoma City, whose chairman, Jack T. Conn, said that when and if the time comes to change state banking structure, member banks in the OBA will have the wisdom to make the right choice. But for now, he said, “let the mem bership decide” before branching or HC bills are submitted to the state legisla ture. The OBA bill is considered to be dead for this year. It was bottled up in committee because of the strong op position presented by the independent bankers. Representing the ABA on the con vention program was A. A. “Bud” Milli gan, ABA president-elect, and president, Bank of A. Levy, Oxnard, Calif. Mr. Milligan presented the ABA’s consensus plan designed to enable banks to achieve competitive parity with other financial institutions. See page 25 for details of the plan. Outgoing OBA Chairman Tracy Kel ly, chairman and president, American National, Bristow, presided at the con vention. In his speech, he called atten tion to the “glaring hiatus in as many as 50% of Oklahoma banks” regarding the lack of planning for continuity of management. “I submit that we owe it to our stockholders and, indeed, our customers, to provide an orderly transi tion and continuity to our bank leader ship,” he said. He criticized portions of President Jimmy Carter’s energy program as be ing heavy on conservation, but with no emphasis on production. “We desper ately need a balance,” he said, and called on bankers to start preaching, practicing and communicating to all the world the economic rudiments of pro ductivity. He said there is precious little incen tive to explore or produce oil and gas “while we develop other sources of energy.” He decried the double taxation on crude oil and finished petroleum products and said, “W e raise the price of oil to conserve, then levy an excise tax or users’ tax. That in anybody’s books makes the consumer pay twice.” Speaking on redistribution of wealth, Mr. Kelly said, “We are approaching in New OBA officers include (from I.) William W. Rodgers Jr., pres., Security Bank, Blackwell— pres.-elect; W alter V. Allison, ch., First Nat'l, Bartlesville—pres.; and Larry E. Stephenson, pres., Security Bank, Ponca City—treas. MID-CONTINENT BANKER for June, 1977 this country the coming breakpoint in this scheme of redistribution of wealth, where the producers are going to be outnumbered by the consumers— the free lunch crowd. We are past due in our commitment to reverse this kind of social and economic nonsense.” Walter V. Allison, chairman, First National, Bartlesville, and OBA presi dent-elect, called attention to the fact that the banking industry is in turmoil, one that is created and kept alive by politicians in Washington. “Changes are coming so rapidly that bankers have difficulty in keeping up with rules and regulations,” he said. “Most of these changes bring additional burden and expense on the industry and are promoted by overzealous leaders in Washington who are dedicated to cor recting the wrongs of a handful of peo ple who call themselves bankers. “We should take every opportunity to speak out against those who betray their banking trust and we should pro mote and participate in those programs that increase the professionalism of our staffs,” he said. He warned that the thrifts are mak ing great strides in their goal to become like commercial banks and said the goals of legislators in Washington, al though defeated by bankers last year, are still on the front burner. However, legislation will be enacted on a piece meal basis instead of in one big pack age, as was tried last year He also warned against incursions in to banking areas being made by credit unions and said that the expanded lend ing powers of credit unions have been hailed by CU leaders as the most sig nificant reform since the Credit Union Act of 1934. “We see the introduction of nation wide share drafts without statutory ap proval and the S&Ls are showing us an improved hybrid of NOW accounts. The insurance companies are taking a hard look at fidelity bonds and the con sumer is demanding credit on his terms, not yours. The staff of the Federal Beserve Board has recommended interest on demand deposits and the mood of Congress may be right for passage of such legislation. It is indeed a bad time for bickering and dissension within our profession,” Mr. Allison said. “It is time that we all remember that we are bankers; brothers in banking,” he continued. “It is time that we unify and work together. As I have said sev eral times, it is time to help out our banking brothers when such assistance will not hurt us. It is time that we fight for a strong profession in the belief that a strong profession will help us in dividually.” During the convention, Mr. Allison was installed as OBA president, filling the office that has been vacant since the resignation of Pat Moore last fall. Elected president-elect was William W. Bogers Jr., president, Security Bank, Blackwell. New treasurer is Larry E. Stephenson, president, Security Bank, Ponca City. No decision had been made at press time if Mr. Kelly would serve George Nowotny (I.), v.p., Bank of Oklahoma, Tulsa, and W alter V. Allison, incoming OBA pres., share podium during discussion of con troversial resolution. a second term as chairman. Morrison Tucker, chairman, First State Bank, Oklahoma City, was elected to the ABA governing council for a twoyear term during the meeting of Okla homa members of ABA. • • G ia n nini Professorship: B a n k A m e rica Fo u n datio n A w a rd s G ra n t to S tan fo rd BankAmerica Foundation, San Fran cisco, has awarded a $ 1-million grant to the Stanford University Graduate School of Business to establish the A. P. Giannini Professorship in Banking and Finance. The endowment honors the late Mr. Giannini, founder of Bank of America. The grant will establish a new fi nance program at the school. The pro gram will sponsor research and devel opment of course materials related to financial institutions, international fi nance and monetary policy and will be directed by the endowment’s first re cipient, Alexander A. Bobichek, a Stan ford faculty member since 1960. MID-CONTINENT BANKER for June, 1977 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis LEFT: Robert L. McCormick, pres., Stillwater N at'l, introduces controversial resolution pre cluding OBA directors from acting on branch ing and HC bills without first submitting pro posed legislation to mail vote of membership. CENTER: Eugene Swearingen, ch., Bank of Okla homa, Tulsa, leads opposition to resolution. RIGHT: Speaking for controversial resolution was Jack T. Conn, ch.. Fidelity Bank, Oklahoma City. He is a former OBA and ABA pres. Gathered beneath portrait of late A. P. Gian nini, founder of Bank of America, San Fran cisco, are (from I.) Alexander A. Robichek, Stanford University professor; Claire Giannini Hoffman, A. P. Giannini's daughter; A. W. Clausen, bank pres.; and Richard W. Lyman, Stanford University pres. Group gathered to announce BankAmerica Foundation's $1-million grant to university's Graduate School of Busi ness, establishing A. P. Giannini Professorship in Banking and Finance. Mr. Robichek is first recipient of chair. 77 ATIONAL NOW account legisla tion, reports by state and national N regulators, an economic analysis and a blistering attack on President Carter’s proposed energy program filled the time allotted for the business sessions of the 93rd annual convention of the Texas Bankers Association last month in Dal las. More than 1,600 were in attend ance. ABA President W. Liddon McPeters, president, Security Bank, Corinth, Miss., presented the ABA’s proposed legisla tive package that would result in authority for banks to offer interestbearing checking accounts similar to the NOW accounts currently being offered by financial institutions in six New En gland states. Details of the plan appear on page 25. Mr. McPeters titled his remarks “The Opportunity for Equality.” The title re ferred to the ABA’s plan to attain the goal of equality for banking’s customers and its institutions. “The means to reach this goal,” he said, “is the proposed legislation being written by the Fed—and publicly cham pioned by Fed Chairman Arthur Burns —to permit, nationwide, a new type of savings account on which consumers can write checks.” He said enabling legislation is expect- By LAWRENCE W. COLBERT Assistant to the Publisher ed to be introduced in Congress soon and he challenged his listeners to use this legislation to gain the parity bank ers have so long sought. Once parity is obtained, Mr. Mc Peters said, ABA would support legisla tion that would give banks and other depository institutions the option of of fering customers a way to write checks on a new type of savings account. In return for that support, the ABA wants the statutory interest rate differential removed from the Interest Rate Control Act. “This means that all S&Ls here in Texas that choose to offer this new type of account would no longer enjoy the quarter-point interest rate advantage of their other savings accounts,” he said. “The same uniform interest rate would also apply to credit unions, should they be authorized to provide these check like powers. “Our competitors already have ac cumulated many third-party payment powers,” he said. “This competitive drive has paid off for them, too. In 1975 the growth rate in share of de posits for mutual savings banks was 11.3%, for S&Ls it was 17.7%, for credit unions it was 21.9% and for banks it was 4.6%. In percentages of total de posits, banking has slipped from a high of 67.4% in 1970 to 64.5% in 1975.” Many of these new powers, he con tinued, have come from action at the state level. In Texas, he said, S&Ls are authorized to offer such consumer ser vices as pre-authorized bill paying, manned remote service units and offpremise automated teller machines, bill paying by telephone and telephone transfers from savings to checking. Credit unions in Texas are permitted to offer share drafts and to operate manned remote service units and offpremise ATMs. This shows, he said, that it’s too late to debate whether or not banking’s com petitors should have third-party pay ment authority—they already have it. C. Jackson Grayson Jr., chairman, American Productivity Center, Dallas, and a former professor at the School of Business Administration at Southern Methodist University, Dallas, spoke on the economic situation. He went on record as not supporting wage and price controls because, in his words, “the economic news is excellent.” He said the competitive system is still the best system, but he cautioned that the competitive market system is losing ground. He said that, in the short run, the U. S. will experience a good year in terms of economic growth. However, he added, there will be continuing infla tion. He predicted a good recovery in the basic industries and no recession either this or next year. The consumer price index for 1977 will be 6.5 or 6.75, he said, and the inflation rate will stand at 7% this year and rise to 732% during the next two years. Unless the inflation psychology is dampened, he added, the country might experience double-digit inflation once again. New TBA officers include (from I.) E. W. W il liams Jr., e.v.p., Amarillo N at'l.—treas.; Charles L. Childers, pres., Tyler Bank—pres.; and Charles E. Cheever Jr., pres., Broadway Nat'l, San An tonio—v.p. 78 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis MID-CONTINENT BANKER for June, 1977 L. Frank Pitts, Pitts Oil Co., Dallas, addresses TBA convention on energy and politics. Dr. Grayson said the unemployment rate will ease down from the current 7% to 6.7% or 6.5% by the end of 1977. Real GNP, he added, will be 4.5% for 1977 and 5.3% for 1978. Real growth stands at between 4% and 5% and the prime rate is slowly rising. He said the “inflation rate scares me the most.” He called attention to the Keynesian notion that an increase in demand by itself will increase supply and therefore accelerate economic growth. But, he added, the “new” eco nomics asserts that an increase in de mand, where the natural incentives to economic growth are stifled, will result simply in inflation. It is only an increase in productivity, he said, that converts latent into actual demand by bringing commodities (old and new) to market at prices people can afford, that gen erates economic growth. He said there has been a decline in governmental and industrial productiv ity. The rate from 1948 to 1966 stood at 3.3%, he said. Now it’s 2.1%. Japan enjoys a 9% rate. Despite the decline in U. S. productivity, the nation still holds first place in that category. Dr. Grayson noted that three banks have pledged support to his American Productivity Center, which is being, formed. The banks are First National and Continental Illinois National, both in Chicago, and Wells Fargo in San Francisco. He said he would like to see more bankers take an interest in im proving productivity by pledging sup port to his center. H. Joe Selby, first deputy Comptrol ler of the Currency for operations, spoke before the National Bank Division. “The future of banking implies many technological changes,” he said. “These changes are now being discussed and implemented and include CBCTs, debit cards, electronic funds transfers, etc. But all of this is merely technology; we Americans have always been in love with gadgets and machinery.” This is the stuff that the American dream is made of, he said, but the technology of the gadgets will never be accepted unless American banking en terprise perceives these changes as be ing worthwhile and practical. The one fact of life of modern banking is that banking is being slowly buried under an avalanche of paper. One of banking’s miracles has been the ability of the banking system to cope with this ava lanche. He cited statistics to give some di mension of banking’s ability to cope. In California in 1966, about $50 of checks were written annually against an aver age $1 of demand deposits. By the end of 1976, that volume had risen to $126 of checks written against an average dollar balance maintained in western metropolitan centers—equivalent to an 11% compounded increase per year. “Eventually,” he said, “we will have to move toward electronic banking, not because the Comptroller or IBM says so, but because the banking system and its customers have totally accepted it as being the only possible course to take.” “The entire nation now can see how our energy crisis has degenerated into a political struggle, with taxpayers and consumers the ultimate victims as usual with a dagger pointed at the heart of the Texas economy.” These are the words of L. Frank Pitts, president, Pitts Oil Co., Dallas, final business session speaker. Mr. Pitts said President Carter has gone back on his word to work for de regulation of the oil industry, made prior to the election. “The president is trying to sell the American people on his idea that the nation’s energy problems can be largely resolved through conservation, com pletely ignoring the wide gap that exists between consumption and production,” Mr. Pitts said. “President Carter’s new energy plan is only another gigantic tax plan to fi nance bigger government,” Mr. Pitts said. “Fuel taxes alone could cost con sumers $5 billion a year within two Charlie Childers, new assn, pres., receives his badge of office from retiring Pres. Ross Green wood. MID-CONTINENT BANKER for June, 1977 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Retiring Pres. S. R. Greenwood, pres., Temple Nat'l, addresses TBA convention. years. And if all his tax proposals are adopted, it is possible for taxpayers to be saddled with as much as $75 billion a year by 1980. “If Congress will allow the price of new natural gas to seek its own level in the marketplace in competition with other fuels, this will cause more deep wells to be drilled,” he said. “Then a drilling boom will take place and we can and will find adequate reserves of natural gas to last a long time— and we’ll find lots of new oil, too.” He said Texas has provided a model to the nation on how to solve the energy shortage by deregulating natural gas consumed within the state. He called on bankers to help tell the true story of the situation to the voting public so individual Americans can use their com mon “horse sense” to make the right de cisions. New TBA president is Charles L. Childers, president, Tyler Bank. Other new officers are Charles E. Cheever Jr., president, Broadway National, San An tonio— vice president; and E. W. W il liams, Jr., executive vice president, Am arillo National—treasurer. Newly elected National Bank Divi sion officers are C. W. Jones, president and chairman, Mercantile National, Cor pus Christi—chairman; Gene H. Bishop, chairman, Mercantile National, Dallas— vice chairman; and Thomas G. Parker, chairman, First-Taylor National— sec retary. State Bank Division officers are W ar ren B. Duren, president, Mills County State, Goldthwaite—chairman; M. L. Everett, president, Washington County State, Brenham—vice chairman; and Stephen T. Jordan, president, Central Bank, Farmers Branch— secretary. Outgoing TBA President S. R. Green wood, president, Temple National, was elected to a two-year term on the ABA governing council. * * 79 Interest on Demand Deposits Takes Spotlight in Arkansas; Cecil Cupp Jr. Named Pres. By ROSEMARY McKELVEY M a n a g in g Editor AYMENT of interest on demand de posits—one of the hottest topics in banking today—was given the most emphasis during the annual convention of the Arkansas Bankers Association in Hot Springs last month. In fact, so many Mid-Continent-area convention programs this year were focused on this subject that a complete discussion of it appears as a feature on page 25. In Arkansas, the topic was discussed May 16 by ABA President-Elect A. A. “Bud” Milligan, president and chair man, Bank of A. Levy, Oxnard, Calif. The following day, the American Bank ers Association portion of the business session was devoted mainly to this sub ject. The discussion was led by Thomas Wilson, chairman, First State, Conway, who had been designated to conduct the ABA section of the convention pro gram by W. M. Campbell, ABA vice president for Arkansas, who is in ill health. Mr. Campbell is chairman, First National of Eastern Arkansas, Forrest City. Mr. Conway also represented Mr. Campbell at two ABA Governing Council meetings, one held in February and the other in April. These two meet ings produced the ABA’s proposed eight-point legislative and regulatory package on interest on demand-deposit accounts. As noted above, this package and other background on this topic ap pear elsewhere in this issue. Mr. Wilson called the outgoing Ar kansas Bankers Association president, P Father-son combination Is shown at past presi dents' get-together May 16 during Ark.BA convention. Incoming association pres., Cecil Cupp Jr. (I.), visits with his father, Cecil Cupp Sr., ch., Arkansas Bank, Hot Springs, where younger Mr. Cupp is pres. William H. Kennedy Jr., to the dais to assist him in conducting this portion of the program. Mr. Kennedy is president, National Bank of Commerce, Pine Bluff. Mr. Wilson read a speech that ABA President W. Liddon McPeters gave at the Governing Council’s April meeting. Mr. McPeters, president, Security Bank, Corinth, Miss., traced the seven-year growth of third-party-payment powers of S&Ls, mutuals and credit unions and then described the ABA’s proposal on payment of interest on demand de posits. Both Mr. Wilson and Mr. Kennedy commented on the proposal and then opened a question-and-answer period on it. The ABA section of the May 17 business session ended with the unani mous election of Mr. Kennedy as the Arkansas Bankers Association’s repre sentative on the ABA Governing Coun cil. The May 16 business session fea tured talks by Lawrence K. Roos, presi dent of the St. Louis Fed, and Senator Edwin Jacob “Jake” Garn (R.,U tah). Mr. Roos, whose remarks appear on page 27, spotlighted the problem of dwindling Fed membership. Senator Garn, a member of the Sen ate Banking, Housing and Urban Af fairs Committee, made a hard-hitting— and well-received—attack on the na tional debt and budget, the 95th Con gress and consumer groups. The senator pointed out that the U. S. budget deficit this year will be $55 billion to $56 billion, “if we’re lucky.” He compared this with 1932, when the entire budget was only $4 billion. Senator Garn said that the 1977 budget has been set at $450 billion, but the country has revenue of only $395 billion. Turning to the national debt, he said it will rise to about $800 billion this year, and interest on this debt will be $40 billion. He brought these figures home to his audience when he said that $1 out of every $10 paid as income taxes goes to pay the interest on the national debt. He said that this country didn’t spend $100 billion in one year until 1962; this figure rose to $200 bil lion in another seven years, and Senator Garn now foresees a half-trillion-dollar bu d g et in the not-too-distant future. According to the man from Utah, this Congress is “fiscally irresponsible, if not fiscally insane.” Whereas the pub lic is fiscally conservative, he continued, Congress goes merrily on its way pass ing more rules and regulations and creating more deficit. Senator Garn advised the public to wake up its legislators to the fact that lawmakers—entrenched in Washington for years— are not what our founding fathers wanted; that they envisioned “citizen legislators, to serve a term or two, then go home. “This country,” said the senator, “is being run by special-interest groups, such as the Ralph Nader group. They’re well run and well financed. They’re a majority in the minority groups (I don’t mean racial) who vote. W e’ve surren dered to these special-interest groups.” When consumer groups want a law or regulation passed, advised the sen ator, the public should ask three quesOutgoing Ark.BA Pres. William H. Kennedy Jr. (2nd from r.) is pictured with association's officers for 1977-78: 2nd v.p., James C. Hobgood (I.); treas., Artie Seidenschwarz (2nd from I.); pres., Cecil Cupp Jr. (c.), and 1st v.p., Doyl E. Brown (r.). 80 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis MID-CONTINENT BANKER for June, 1977 Ark.BA past presidents and friends are pictured during convention May 16 at traditional, although unofficial, noontime get-together. LEFT: Outgoing Ark.BA nedy Jr. (r.) talks with Campbell, First Nat'l of rest City. Mr. Campbell 1967-68. Former association heads have been gathering 1920s. like this since late Pres. William H. Ken a predecessor, W. M. Eastern Arkansas, For headed association in RIGHT: Three past presidents of association en joy reunion during convention. L. to r., they are: Dorman Bushong, pres., Farmers & Mer chants, Rogers; George R. Shankle, pres. & CEO, First Nat'l, Hot Springs, and M ax A. Mitcham, ch., Smackover State. tions: What will it cost? Who will pay for it? Who will benefit from it? He be lieves that if a price tag is put on pro posed legislation, the public will realize it doesn’t want or need it. “We must get politically involved and play ‘hardball’ the way special-in terest groups do,” he added and cited the average citizen’s apathy as the source of the problem of having legis lation passed that’s detrimental to the country. He suggested that business men treat anti-business legislators the same way “Nader treats me.” “We need to protect our environ ment,” said the senator, “but we’ve gone too far. W e now need moderation and old-fashioned horse sense. We should not let the pendulum swing from one side to another without hav ing it stop in the middle.” Junior B ankers Report. Bart Lindsey, president of the Junior Bankers Section of the association, reported on his group’s educational efforts. Mr. Lind sey, marketing officer, First National of Phillips County, Helena, said his group helps sponsor the School of Basic Banking, the Trust, Marketing and Lending schools, all of which he de scribed as highly successful. Two schol arships are given to banking students at the University of Arkansas and Ar kansas State, and the Junior Bankers contribute to the Chair of Banking at the University of Arkansas. However, Mr. Lindsey said these ef forts still are not enough because only 1,000 bankers out of 13,000 bank em ployees in the state have attended any of the banking schools. The Junior Bankers are doing better in the AIB, with more than 2,000 persons having taken one or more courses there this past year. He advised bank manage ments to go to their employees and ask them whether they want to take any banking courses. He added that banks need well-educated staffs and closed his report by pointing out that Arkan sas offers young bankers excellent op portunities, but they must capitalize on them. Hopefully, he added, the Junior Bankers will help the state’s bankers do that. L egislative Report. Louis Ramsey, chairman of the association’s state gov ernment relations committee and presi dent, Simmons First National, Pine Bluff, discussed some recent legislation. He talked about Act 106, an enabling act resulting from adoption of Amend ment 57, which exempts all intangible personal property from taxation. Act 949, according to Mr. Ramsey, allows banks’ trust departments to invest short-term funds in their own banks if those banks have FD IC insurance. In addition, Mr. Ramsey said that the Ar kansas General Assembly passed ena bling electronic funds transfer legisla tion. Under it, banks can install ATM and POS terminals in banks and stores within the city limits of a bank’s domi cile community. He emphasized that U. S. Senator Edwin Jacob "Jake" Gam of Utah (r.), convention speaker, visits with H. C. "Bo" Carvill (I.), Ark.BA exec, dir., and W il liam H. Kennedy Jr., who served association as pres, this past year. Mr. Kennedy is pres., Nat'l Bank of Commerce, Pine Bluff. MID-CONTINENT BANKER for June, 1977 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis the new law does not allow across-thestate and across-county-line hookups. Resolutions. Beverly Lambert Jr., resolutions committee chairman and vice chairman, First State, Crossett, re ported on resolutions approved by his committee. They included advocating that the State Banking Department be made an independent agency; lauding the Texas Bankers Association for hav ing brought together state bankers as sociations to discuss grass-roots senti ment on various issues and for provid ing the leadership needed to tell bank ing’s story to the country; and express ing congratulations to Harvel C. Adams for being elected 1977-78 presi dent, Conference of State Bank Super visors. Mr. Adams once headed the Ar kansas Bankers Association. Constitutional Revisions. New re visions for the association’s constitution were described by B. Finley Vinson, chairman, First National, Little Rock. They included changing the title of the executive council to board of di rectors and the titles of executive man ager and assistant manager to execu tive director and assistant director, re spectively. N ew Officers. Cecil Cupp Jr., presi dent, Arkansas Bank, Hot Springs, was elected to succeed Mr. Kennedy as as sociation president. He moved up from president-elect. Other new officers are: first vice president, Doyl E. Brown, president, First National, Wynne; sec ond vice president, James C. Hobgood, chairman, Merchants & Planters Bank, Arkadelphia; and treasurer, Artie Seidenschwarz, president Farmers & Mer chants Bank, Stuttgart. Winners of the portable TV sets given away during the convention were Thomas E. Hays Jr., president, First National, Hope, and John F. Phillips Jr., president, Bank of Holly Grove. * * 81 ANKING’S FU TU R E in light of proposed legislation and challenges to management were focal points of the 89th annual convention of the Mississip pi Bankers Association held in Biloxi last month. On hand to present the ABA’s pro posed legislation that is designed to create parity for bank customers and banks with thrift institutions was A. A. “Bud” Milligan, ABA president-elect, and chairman and president, Bank of A. Levy, Oxnard, Calif. He referred to the ABA’s proposal that would give banks and other depository institutions the option of offering consumers the op portunity to write checks on a new type of savings account (variously known as “NOW”—Negotiable Order of With drawal— accounts or share drafts), say ing, “Today, the thrifts have access to many options that they may want to use some day. Banking’s problem is that it needs to have options to use in the future.” He then outlined the proposal’s eight points : • Parity of interest rate ceilings, re serve requirements and treatment of B By DANIEL H. CLARK Assistant Editor reserves on such new accounts must be established for the benefit of customers of all institutions that offer such ac counts. • The statutory interest-rate differ ential must be removed from the In terest Rate Control Act. The advantage of the rate differential must be removed by regulatory action from all classes of savings accounts for any institution electing to offer check-like accounts. The National Credit Union Adminis trator must become a member of the Interagency Coordinating Committee; thus, the same rate ceilings that exist for other types of financial institutions would apply to credit unions. • The new type of account must be " The n e w tr a n s a c tio n the only interest-bearing transaction ac count permitted for all banks, thrifts and credit unions or for any other in stitutions offering such accounts now or in the future. The new account would be an alternative to, and not a replace ment for, conventional checking and savings accounts. This also would ap ply to interest-bearing accounts on which demand-type withdrawals via electronic terminals are permitted. • Reserves on this type of account at non-Fed member banks could be held at any correspondent bank. Uni form reserves on those accounts offered by depository institutions other than banks would be held by the Fed or by other depositories by agreement with the Fed. No class of Fed membership or affiliation would be compulsory for any financial institution. t y p e o f a c c o u n t m u s t b e t h e o n ly in t e r e s t - b e a r in g a c c o u n t p e r m it t e d f o r a l l b a n k s r th r ift s and c r e d it u n io n s . . . n o w o r in th e f u t u r e • The new type of account must be limited to customers who meet the strict definition of a household account. This would exclude businesses, etc. ® A one-year preparation or transi tion period must be allowed between enactment and implementation of the law. Such a law would take effect im mediately in the six New England states, however, giving banks in those states the parity provided in the legis lation. From I., outgoing MBA pres. John H. Mitchell Jr., v. ch. and CEO, Nat'l Bank of Commerce of Mississippi, Starkville, hands gavel of of fice to new MBA pres. Ray K. Smith, pres, and CEO, First N at'l, Greenville, while R. D. "Bobby" Gage III, new MBA v.p., and Paul W. McMullen, new assn, treas., look on. Mr. Gage is pres, and CEO, Port Gibson Bank, and Mr. McMullen is ch. and CEO, First Mississippi Nat'l, Hattiesburg. 82 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis MID-CONTINENT BANKER for June, 1977 • Full, effective regulation and ex amination must be applied to all finan cial institutions offering this new type of account. • The Fed and the F D IC should provide banks the additional option of offering pre-authorized transfers from savings to checking accounts. The outgoing Mississippi Bankers As sociation president, John H. Mitchell Jr., vice chairman and CEO, National Bank of Commerce of Mississippi, Starkville, addressed the conventioners on “The Challenge for Management.” He said, “It is possible that our in dustry now is facing the most severe challenges that it has faced since the Great Depression. Regulatory authori ties are altering many rules, elected representatives seem determined to re structure the entire financial system and complex economic conditions and rising costs make internal decisions more and more difficult.” He cited several points that he felt bank management must take into con sideration in the future: • Bankers must assure themselves of their ability to continue to formulate and attract capital into their institutions. • The vast majority of deposit in creases in banks is showing up in time and savings deposits, a trend that cre ates a need for additional emphasis on proper liquidity by bank management. Mr. Mitchell said, “A bank that leaves itself no flexibility in determining rates to pay for funds—because of lack of liquidity— certainly leaves itself wide open for abnormally high fund costs; and this will affect profits adversely.” • Employees are the most valuable asset a bank has. Considerable atten tion and skill are required to develop maximum output and efficiency from employees. He noted, “A rapid glance at rising social security costs, employee benefit costs and reasonable wage in creases quickly substantiates the neces sity for skilled management of the per sonnel function of our banks.” • The rapidly changing, complex economic conditions in which banks must compete require a basic under standing and the ability to relate de cisions to an appraisal of these condi tions. As an example of this, he asked, “For instance, is today’s market a good one in which to buy intermediate or longer-term maturities for an invest Outgoing MBA pres. John H. Mitchell Jr. (I.) presents 50 Year Club certificate to Russ M. Johnson, advisory dir., Deposit Guaranty Nat'l, Jackson. ment account? Is this the proper time to consider taking profits that may exist in the investment account? How much liquidity is needed for the level of eco nomic activity you anticipate during the next 12-24 months?” The Starkville banker also noted that bankers must concern themselves with the effect that inflation and government policies have on the customer’s needs, adding that this requires increased skill and knowledge on the part of lending officers to make credit decisions and to advise customers properly on credit and other needs. Mr. Mitchell said, “Studies exist that indicate that, within the next 10-12 years, individuals, not business and government, will become the greatest suppliers and users of funds. They will be particular about which bank and1 which bank services they select. They will be a part of an overall consumerist movement . . . (Bankers) must at tempt to understand their needs and requirements, and in so doing, develop services that will be meaningful to this great mass of potential customers.” In conclusion, Mr. Mitchell discussed the increasing amount of interest on the part of some Mississippi legislators in increasing taxes paid by the state’s banks, noting an effort during the last legislative session to subject banks to an ad valorem tax on personal prop erty. “We believe it a necessity,” he said, “that the association make a re sponsible study of bank taxation prior to the 1978 session of the Mississippi legis lature so that responsible bank tax legis lation can be recommended for con sideration.” Ray K. Smith, president and CEO, First National, Greenville, was elected MBA president, succeeding Mr. Mitch ell. R. D. “Bobby” Gage III, president and CEO, Port Gibson Bank, was ele vated from association treasurer to vice president, while Paul W. McMullen, chairman and CEO, First Mississippi National, Hattiesburg, was elected MBA treasurer. • • . . Is t o d a y 's m a r k e t a g o o d o n e in w h ic h to b u y in t e r m e d ia t e o r lo n g e r - t e r m m a tu r itie s f o r a n in v e s tm e n t a c c o u n t? Is th is th e p r o p e r t im e to c o n s id e r t a k in g p r o fits t h a t m a y e x is t in th e in v e s t m e n t a c c o u n t? H o w m u c h liq u id it y is n e e d e d f o r th e le v e l o f e c o n o m ic a c t iv ity y o u a n t ic ip a t e d u r in g th e n e x t 1 2 - 2 4 m o n th s ? " At I., MBA guest speaker A. A. "Bud" Mil ligan, ABA pres.-elect and ch. and pres., Bank of A. Levy, Oxnard, Calif., addresses conven tion on ABA's proposed parity legislation. At r., Orrick Metcalf, Natchez, delivers necrology report. MID-CONTINENT BANKER for June, 197 7 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 83 D o Your Correspondent Banking W ith O u r First National Bankers O f Birm ingham . Gordon C. Hurst Senior Vice President Charlie T Gray Vice President H. S ta ffo rd N a ff Jr. John M. Campbell, Vice President Assistant Vice President SOUTHEASTERN BANKING DEPARTMENT THE FIRST NATIONAL BANK OF BIRMINGHAM AN ALABAM A BANCORPORATION AFFILIATE 84 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis MEMBER FD.LQ MID-CONTINENT BANKER for June, 1977 i l north Alabama city of Huntsville By LAWRENCE W . COLBERT Assistant to the Publisher for their 84th annual convention last month—the first time the association held its annual meeting in that city. The city gave the bankers a warm reception. Ala.BA President Robert H. Woodrow Jr., vice chairman, Alabama Bancorp., Birmingham, commented that “we should have come (to Hunts ville) before now and we will want to come back in the future.” Huntsville, long associated with the nation’s space program, is the home of the Marshall Space Flight Center and the Alabama Space and Rocket Cen ter, the latter of which figured prom inently in the social activities of the convention. The city’s population has expanded tenfold in the past two dec ades. Involvement, both in banking and political matters, was the thread that tied the convention speakers’ presen tations together. Association President Woodrow led off the roster of speakers with his pres ident’s address. In it he gave recogni tion to the expanded educational pro gram of the association, stating, “. . . we expanded the program, not only in quantity, but also in quality and this we will continue to do. W e expanded use of our own membership and en tered into several new programs. This expansion will continue for the bene fit of and use by our members.” Mr. Woodrow devoted much of his address to the topic of change. “We are, without question, in a period of rapidly changing times and the challenge is offered to each of us to adapt to, plan for, and be involved in the changing process,” he said. He specified three types of reaction to change— griping, attempting to post pone and finally going along reluctant ly; estimating a change in advance and ALABAMA bankers traveled to the An example of Huntsville's hospitality was this sign that greeted bankers as they entered the Von Braun Civic Center. getting into trouble as a result; and at tempting to shape the change, which means playing a larger and more im portant role in the public area. “I think that those of you who were on our recent Washington trip will agree with me on this,” he continued. “We can be only in the third category where there is no place for emotion, but only a place for action.” He said that this is a day of con sumerism and if bankers don’t acknowl edge that fact, they are in trouble as an industry. “We have only services to sell and if we don’t market the services wanted by consumers, they can and will go elsewhere and we have no one but our selves to blame,” he said. He asked his audience to think back New Ala.BA officers for 1977-78 include (from I.) C. E. Avinger—s.v.p.; George J. Shirley, pres., First Nat'l, Tuscaloosa—2nd v.p.; Charles S. Snell, pres., Citizens N at'l, Shawmuf—pres.; W. H. Mitchell, pres., First Nat'l, Florence—1st v.p.; Sue K. Morris—sec.-treas.; and Howard J. Morris—e.v.p. MID-CONTINENT BANKER for June, 1977 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 85 for an example of this type of situa tion. Banks didn’t want to make socalled installment loans and the result was the emergence of the GMACs and the CITs— creating a loss from which banks have never truly recovered. One major exception to resistance to change was A. P. Gianini, who adapted to change, met the challenge and gave customers what they wanted, he said. The result was the growth and de velopment of Bank of America. Mr. Woodrow called attention to some of the changes facing Alabama bankers. “First, there is the strong possibility that the NOW accounts, with which all of you are familiar, will be nationwide before year-end. Obviously, these would be interest-bearing accounts. They have been endorsed by the Fed and other regulators and should be viewed as a transition to the ultimate of interest on all demand accounts.” Use of the 1933 argument that de mand account interest undermines bank safety apparently doesn’t carry much weight today, he said, since banks are giving away other services, such as free checking. He said that a reasonable interest ceiling on NOW account balances and Arthur Tonsmeire Jr., pres. & ch., First Southern Federal Savings, Mobile, points out share of savings money held by S&Ls, commercial banks and credit unions, both nationally (top photo) and for Alabam a (bottom photo). Mr. Tons meire was part of panel on credit unions. payment of interest on balances at the Fed or on similar type balances could help cushion the impact of the cost of paying interest on NOW-type ac counts. “We of the banking industry can hurt ourselves immeasurably by strong ly opposing this innovation,” he said. “It is a consumerist measure, but it carries the endorsement of the regula tory agencies and of many of our " C r e d i t u n io n s in s o m e s ta te s Partnership and Involvement. a r e m o v in g to a s s u re t h a t t h e ir th ir d -p a r ty p a y m e n ts — s h a re d r a ft s — w i l l These two words describe how Don Lamon and his associates feel about their relationship in Correspondent Banking with your bank’s needs. CALL TOLL FREE 800-392-5821 UNION BaiUK&TRUST GO. 60 Commerce St. • Montgomery, AL 36104 L argest In d e p e n d e n t B ank MUNICIPAL BONDS CORPORATE SECURITIES INDUSTRIAL DEVELOPMENT REVENUE BONDS Member MIDWEST STOCK EXCHANGE HENDRIX, MOHR & YARDLEY, INC First National—Southern Natural Building Birmingham, Alabama Tel.: 205/328-2980 86 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Union Bank Building Montgomery, Alabama Tel.: 205/265-9231 be a c c e p t a b le . In th e s e s ta te s , c r e d it u n io n s a c t u a l l y a r e b u y in g o r e s ta b lis h in g b a n k s . " friends in the Congress. Instead of looking at this issue as the coming of doomsday, let’s look at it constructive ly and positively as a blessing in dis guise. “We have an actual example by which to convince our customers that there is no free lunch,” he said. “We can find out what our real costs are and we can sell our services for their true value.” However, he cautioned, this is not going to just happen. Planning will be necessary, and the planning should be gin now. “All of the changes to which I refer will not come overnight,” he said, “so we can and must use the time wisely to plan and be ready for changes or we can sit still, squabble amongst ourselves and be completely out of step when change comes.” He said E F T is still in the planning MID-CONTINENT BANKER for June, 1977 ff ftcairtbedonephone^o-phone, well be there race-to-face. No matter how much distance there is between you and our correspondent bankers, we promise you this: We’re going to be more than a voice on the other end of the phone. Jim Andress and Jack Andrade will see to that. They work hard to make sure each of our cor respondents get the personalized service they’ve come to expect from us over the years. And the professional service, too. In data proc essing, operations, marketing, international banking and investment securities. Even services in such specialized areas as land management, One phone call to Jim (left) or Ja ck (right) w illget you started. geology, forestry and oil exploration. It’s all covered in a free brochure we’d like to send you. Just call toll free. In Alabama (800) 6 7 2 -6 7 0 9 and in the Southeast (800) 633-6710. One phone call to First National will get you started. And, whenever you’re ready, # First National Bank of Mobile p.O. Drawer 1467, Mobile, Alabama 36621. A First Bancgroup-Alabama, Inc., Affiliate Member FDIC. MID-CONTINENT BANKER for June, 1 9 7 7 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 87 Already, over lOO independent banks have chosen Southern National Bank as their correspondent hank. Æ Joe Hughes Jim Lovell Bill Weatherly Frank Barefield President & Chief Executive Officer Senior Vice President Growth & Development Senior Vice President Loans Vice President Investments Mike Tingle George Wilson Joe Brown Assistant Vice President Loans Assistant Vice President and Cashier Assistant Vice President Growth & Development That’s a pretty g o o d record in th e fe w m onths w e ’ve b e e n o p e n . T hat’s liv in g proof that your correspond ent m oney does more for you at Southern National Bank. Call any of the Southern National Bank C orrespond ent Bankers to d a y a n d say: “ I w ant to m ake my corre spondent money d o more for m e.” M ake the call to d a y ... 100 other inde pe nd e nt banks a lre ad y have. 2020 5th Avenue North • Birmingham, Alabama 35203 • 205/251-4500 • in Alabama 1-800/292-8181 88 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis MID-CONTINENT BANKER for June, 1977 mm m ' * iIBIIBm ^ ■m l LEFT: Mr. & Mrs. J. Donald Lamon (I.), Union Bank, Montgomery, visit with Mr. & Mrs. Sonny Johnson, Third N at'l, Nashville, at social hour. MIDDLE: W alter Wiesman (I.), consultant & writer, Huntsville, who ad dressed convention on "The Making of a City," visits with Ernest Ladd (c.), Merchants N at'l, Mobile, and state ABA v.p., and incoming assn. stage and the Ala.BA is continuing an E F T in-depth study started three years ago. The association plans to advise its members of the soundest and least expensive course to follow in this area. “Many of you will say we are com munity banks and will ask how we can participate to prevent large, moneycenter banks from usurping our mar kets,” he said. “The answer is, you exist on personalized services to your customers and you can give E F T as an additional personalized service. Per sonal contacts and basic good service will retain any customer.” Mr. Woodrow said the real concern should be competition from outside the banking industry, not from within. “If you can meet outside competition, you have no fears from within,” he said. “Our customers can and are being sold on 24-hour service and if we give them what they want, we’ll restore the char acteristic of loyalty which is missing so often.” He said the area of credit unions has gone unnoticed, but there has been much planning, organizing and lobbying on their behalf. Instead of being little self-serving groups, credit unions are well organized associations serving the general public. Many are big business. “One point not to be ignored, no matter how you feel about credit un ions, is that by their innovations and marketing they have been smart enough to provide their memberships and the public with services desired and which are not offered by other financial entities,” he said. As a result of offering these desired services, he continued, credit unions have grown both in numbers and in membership size. Money that formerly went into bank accounts now goes in to credit union accounts. Through the process of steady change, they have come to offer many of the usual bank ing services, including loans, and with out the many rules, regulations and restrictions that are heaped upon banks and thrifts. “We have no one to blame but our selves and it is no consolation that it’s not the first time we have, speaking in the vernacular, ‘blown it,’ ” he said. “Here again, consumerism is raising its head and we see credit union assets growing at the rate of 14% a year. Re sentment is not the answer.” He said the approach is to place con trols on credit unions to protect the member and consumer. The approach should not come from the direction of equalizing with other segments of the financial world, because that would give a “sour grapes” approach that would not be accepted. Credit unions in some states are moving to assure that their third-party payments—share drafts—will be ac ceptable, he said. In these states, credit unions actually are buying or estab lishing banks. At the federal level, the Federal Credit Union Act of 1934 has been amended by astute parliamentary maneuvering that virtually eliminated opposition. The new law has greatly expanded the areas in which the credit unions can operate and the services they can offer. Mr. Woodrow called on the mem bership to get involved in engineering change. He said that legislators “beg for our input, and to date, such has been sparse.” He said that major trade associa tions and private businesses are begin- Assn. Pres. Bob Woodrow (I.) visits with guest speaker, U. S. Rep. Richard Kelly (c.), member of House Banking & Currency Committee, and W. H. Mitchell, Ala.BA 2nd v.p. MID-CONTINENT BANKER for June, 1 9 7 7 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Pres. Charles S. Snell, following Mr. Wiesman's remarks. RIGHT: Mr. & Mrs. Jim Lovell, Southern Nat'l, Birmingham, flank Mario R. Bottesini (2nd from r.), Bank of Huntsville, and Mr. & Mrs. Wayne Scott (2nd and 3rd from I.), Bank of Arab, at social hour. ning to work together with the thought that a problem for one is a problem for all. “Here is your challenge,” he said. “Think, plan and get involved so that in the end you do not find yourself on the outside looking in, with other seg ments of our industry on top of the heap. Our position is not a God-given right to automatically be the ‘top dog,’ no matter what.” Continuing the dialogue on credit unions was John D. Chisholm, presi dent, Marquette Bank, Rochester, Minn., whose topic was “The Size and Growth of Credit Unions.” “There is occurring in this country a proliferation and redistribution of the powers of commercial banks that is weakening the fabric of the whole U. S. financial system,” Mr. Chisholm said. “Those in the Congress most critical of commercial banks are responsible for this tinkering. They confuse an over sight responsibility with the actual reg ulation of the financial agencies and are creating general chaos in the pro cess.” He cited the recent treatment of credit union legislation as evidence of the fact that financial agencies can’t be regulated by a congressional committee. “Much of the competitive advantage enjoyed by credit unions (CUs) stems from the special privileges under which they operate and the extraordinary sub sidies they receive,” he said. CUs re ceive subsidies in the form of tax ex emption and the absence of deposit re serve requirements and they often re ceive additional subsidies in the form of contributions, such as rent-free space, from sponsoring organizations. “These subsidies,” he said, “coupled with the lack of corporate shareholders expecting earnings, enable most CUs to pay a higher interest rate on de posits and make loans at lower rates than banks and thrifts.” There are about 22,800 CUs in the U. S. today, serving more than 32 mil89 lion members and holding over $38 billion in assets, Mr. Chisholm said. “During the last 10 years, credit union membership has nearly doubled/ he said. “In January, 1975, about 18% of U. S. families had at least one mem ber of a credit union. It was estimated that in 1974 about 55% of those eligible to belong to a federal CU did so/ He said it is most significant that, al though CUs still have a sizable num ber of lower-income members, the ma jority of their membership is from the middle and upper income brackets. In January, 1975, more than half of the families with a CU member earned over $15,000 and nearly a quarter of these families earned more than $25,000. Less than a third of the families earned less than $10,000. The average size of a share account in a federal CU in 1974 was about $900, he said. About 40% of the shares of CUs are in accounts with balances over $5,000. Ten years ago, the aver age size of a share account was $525 and only 20.9% of the shares were in accounts with balances over $5,000. Let our billion dollar organization help your bank profit. Call Frank Plummer (205/832-8580), chairman of the board of First Alabama Bancshares, Inc. A f f ilia t e B a n k s First Alabama First Alabama First Alabama First Alabama First Alabama First Alabama First Alabama First Alabama First Alabama First Alabama First Alabama First Alabama First Alabama Bank of Montgomery, N.A. Bank of Birmingham Bank of Huntsville, N.A. Bank of Tuscaloosa, N.A, Bank of Dothan Bank of Selma, N.A. Bank of Gadsden, N.A, Bank of Athens, N.A. Bank of Baldwin County, N.A, Bank of Guntersville Bank of Hartselle Bank of Phenix City, N.A. Bank of Mobile County RrsyUabama 90 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis LEFT: John D. Chisholm, pres., Marquette Bank, Rochester, Minn., moderates panel on credit unions. RIGHT: Mary George Jordan Waite, ch. &pres., Formers & Merchants Bank, Centre, de livers a report on the Alabama Bankers Educa tional Foundation. Mr. Chisholm called attention to the fact that, just recently, Congress passed legislation that will provide CUs with new powers, including the offering of home mortgage loans for up to 30 years, providing that the home is the principal residence; home improvement and mobile home loans of up to 15 years, five years longer than formerly; unsecured loans of up to 12 years and of any amount, expanding the former $2,500 limit and adding seven years to the term; revolving lines of credit; and participation in loans secured by government insurance or guaranties. CUs can also use secondary markets to enhance liquidity by buying, selling or discounting eligible obligations to their members, such as real estate loans, he said. “And CUs tell us they will be back for more next year,” Mr. Chisholm said. "Among the items they want are a central liquidity fund to serve as a secondary source of funds when money is tight. Such a fund would be estab lished in the National Credit Union As sociation (NCUA) to make discount loans to credit unions to satisfy sea sonal, temporary or emergency liquidity needs. This fund would be outside the control of monetary policy exercised by the Fed and would probably im pact counter-cyclically on monetary policy through the issuance of NCUA public bonds and notes at those times of monetary tightening when the li quidity structure of CUs would be most pressed. They also want the ability to perform trust services for their mem bers.” There are two major arguments against granting these additional pow- "T h e re is o c c u rrin g in th is c o u n try a p r o lif e r a t io n a n d r e d is tr ib u tio n o f th e p o w e r s o f c o m m e r c ia l b a n k s t h a t is w e a k e n in g th e fa b r ic o f th e w h o le U . S. f in a n c ia l s y s te m MID-CONTINENT BANKER for June, 1977 . . T h e re is th e s tro n g p o s s ib ility t h a t th e N O W a c c o u n ts , w it h w h ic h a l l o f y o u a r e f a m i l i a r , w i l l b e n a t io n w id e b e f o r e y e a r e n d . O b v io u s ly , th e s e w o u ld b e in t e r e s t - b e a r in g a c c o u n ts . T h e y h a v e b e e n e n d o r s e d b y t h e F e d a n d o th e r r e g u la t o r s a n d s h o u ld b e v i e w e d a s a t r a n s it io n to th e u lt im a t e o f in te r e s t o n a l l d e m a n d a c c o u n ts . " ers, he said. The first centers around the unfair competitive advantage cred it unions would enjoy if granted these powers. The second is that some CUs may attempt to offer such services without the resources to do so, which could lead to increased risk for share holders. “Competitive equality relative to CUs and thrifts is especially important to the future viability of thousands of small and medium sized banks through out our nation,” Mr. Chisholm said. “Of the approximately 14,500 com mercial banks, roughly 13,000 are small to medium in size and serve local com munities and suburban areas. . . . Such banks are particularly susceptible to adverse effects from changes and com petition with CUs and thrifts. The com petitive imbalances must be addressed if our small banks and thrifts are to survive,” he said. The topic of equality between banks and other financial institutions was taken up by Ernest F. Ladd Jr., ABA vice president for Alabama, and chair man, Merchants National, Mobile. Mr. Ladd discussed the eight-point legis lative package ABA is sponsoring that will result in parity among financial in stitutions, the emergence of a new type of interest-bearing checking account and several other changes in modes of operation of financial institutions. De tails of the plan are presented on page 25 of this issue. During committee reports, conventiongoers learned that the E F T com mittee has launched the Alabama Clear ing House Association (AlaCHA) into operation at the Birmingham Branch of the Fed. AlaCHA has 193 members, including 180 banks, nine thrifts and four CUs. The committee raised $65,000 for initial funding, writing operat ing procedures, rules and regulations, marketing membership to the banking industry and selecting officers and di rectors to manage the ACH, Two members of the E F T committee worked with LAM ACH A (LouisianaMississippi-Alabama Clearing House Association), which became opera tional early this year. The Ala.BA’s coin collection has been reappraised and the insurance on it has been increased to reflect the almost trip ling in value of the collection. An ap praisal study has shown the value of the collection to have increased from $56,000 to $140,500. Rental fees for the collection have been increased to defray the higher insurance premium. A report on the first year of the Ala bama Banking School revealed that the enrollment goal of 60 students was achieved and all passed their exams. The convention location committee has selected Mobile for the 1978 meet ing. Tentative dates are May 10-12. Charles S. Snell, president, Citizens National, Shawmut, assumed the Ala.BA presidency during the convention and W. H. Mitchell, president, First National, Florence, took over the first vice president’s duties. Elected second vice president was George J. Shirley, president, First National, Tuscaloosa. Mr. Shirley was also elected to the ABA’s governing council for a twoyear term. Mr. Snell has served three terms in the Alabama legislature and three years as head of the Ala.BA state legislative committee. He is a native of Langdale and holds BS and MS degrees from Auburn University. • • What’s this about Alabama? Farmers & Merchants Bank Centre, A labam a Downtown — Diane — Leesburg The Bank With The Heart of Gold You haven't heard? Well, things have really been happening! There’s a virtual explosion in growth— more than a billion dollars in new and expanded industry in just 3 years! With the discovery of new energy sources just north of Mobile and the completion of the Tenn-Tom Waterway draw ing closer, more growth is coming. Merchants National is contributing to this growth . . . and we can help you grow, too! Contact: Henry F. Schaub, Executive Vice President In Alabama: 1-800-672-3095 In the Southeast: 1-800-633-3017 Cherokee's Largest Mrs. Mary George Jordan Waite, President Member FD1C MID-CONTINENT BANKER for June, 1977 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis ■ « 1 Merchants National Bank Mobile, Alabama Member F.D.I.C. AN AFFILIATE OF SOUTHLAND BANCORPORATION 91 Problems of Banking, Nation Discussed At Tennessee Convention in Gatlinburg ROBLEM S facing the banking in dustry and the nation as a whole were thoroughly discussed at the 87th annual convention of the Tennessee Bankers Association in Gatlinburg last month. Outgoing TBA President Hugh M. Willson, president, Citizens National, Athens, called attention to the impor tance of people and management de velopment during his president’s ad dress. “While there is a great common de nominator in our product and service,” he said, “the only essential difference is that little difference that you and I and the individuals within our bank are able to give which we call service. It may be just a smile, but it needs to be more than that. It needs to be a level and im age of competence that pulls us out of the crowd of our competitors.” Mr. Willson also reviewed the state legislative picture during his address. He reminded his audience that some time this month the Tennessee Supreme Court will hear a case in which finance companies challenge the validity of the law that provides for a 73£% interest rate ceiling on installment loans. He said the attack against this low maximum rate will be made on constitutional grounds. “Your association is intervening ami cus curae in this case because of the tre mendous impact it will have on the economy of Tennessee if the constitu tion should be construed by this court in such a narrow way as to negate the practices of the finance companies, P By RALPH B. COX Editor and Publisher banks, savings and loans and all other leaders in the installment area that have been in effect for over 50 years,” he said. He congratulated Tennessee bankers for their assistance in passing last year’s referendum authorizing the constitu tional convention that convenes this summer to modernize the constitution in regard to interest rates. “I know of no more important issue that has faced this state in perhaps the last 100 years,” Mr. Willson said, refer ring to the constitutional convention’s goal. Convention speaker Bert Lance pre sented his view of the national priority to the conventiongoers. Mr. Lance is director of the Office of Management and Budget for the Carter Administra tion. “Inflation undoubtedly is the nation’s number one problem,” he said. He in dicated that inflation may very well have replaced unemployment as the most pressing problem. “We’ll have to deal with both problems at the same time,” he said. He added that, for the first time, the public is really concerned about govern ment fiscal responsibility. The way to exercise this responsibility wisely, he said, is through increased capital and productivity. He predicted that President Carter will balance the budget in 1981 and that a zero-based budgeting process will help bring this about. It will help the Congress set priorities, he said. He added that Congress is in a favor able mood to take a look at spending. He said the Carter Administration hopes to work closely and carefully with the Congress in shaping future spending programs so the budget can be bal anced. The other major speaker at the gen eral business session was Gerald M. Lowrie, executive director, ABA gov ernment relations. Mr. Lowrie espoused the ABA line of accepting NOW ac- Pres. Jimmy Carter's budget dir., Bert Lance, former banker from Georgia, spoke during general business ses sion. counts as a trade-off for the payment of interest on reserves. (Turn to page 25 for complete details of the ABA’s position. ) The independence of the Federal Re serve System is one of the greatest strengths of the U. S. economy, said Robert Forrestal, senior vice president and general counsel of the Atlanta Fed, at the National Bank Division meeting. “If the Fed loses its independence,” he said, “the printing press and money will be turned over to the politicians, which will not be in the public inter est.” He predicted that enabling legislation for nationwide NOW accounts would be enacted by 1978 at the latest and that payment of interest on reserves held at the Fed would come about. It is his opinion that every type of savings in stitution should be required to hold equal reserves. Tennessee bankers were quite inter ested in remarks made by George Doak, president, Kansas Development Credit Corp. (K D C C ), Topeka, who spoke at the joint session of the State and Na tional Bank divisions. TBA officers for 1977-78 include (from I.) Ch. Hugh M. Willson, Pres. Jack R. Bulliner, Pres.Elect Andrew Benedict, 1st V.P. G. Robert Taylor, 2nd V.P. James R. Fitzhugh. 92 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis MID-CONTINENT BANKER for June, 1977 LEFT: W alter Barnes (I.), ABA v.p. for Tenn., and pres.. First Nat'l, Jackson, and Gerald M. Lowrie, exec, dir., ABA Gov't Relations, par ticipated at general business session. CENTER: Jere Williamson (I.), new ch., State Bank Div., and pres., First State, Brownsville, and George Morgan, new TBA dir. for East Tenn., and ch., Valley Fidelity His topic was industries financed and jobs created through the KDCC. Ten nessee has enabling legislation on its books to accomplish the same thing as Kansas, but apparently the same kind of progress has not been made in Tennes see. Mr. Doak pointed out that 430 of the 615 Kansas banks are participating in KDCC. Banks loan up to 3% of their capital in surplus at the prime rate to help create a special loan pool to help “struggling industries” that can’t be fi nanced directly by banks or through the SBA. During its 10-year existence, KDCC has made loans totalling $65 million to 134 firms, creating more than 15,000 jobs and an annual payroll of $63 mil lion. Half of those loans were made in communities of less than 5,000 popula tion, Mr. Doak said. He reported that losses were .6% throughout the corporation’s existence. He said that one of the interesting facets of the Kansas law that authorized the KDCC is that when a loan is made to a struggling company, it is required, wherever possible, that the firm make purchases of materials and supplies from other Kansas firms. Mr. Doak said this provision is partly responsible for Kansas’ 4% unemployment rate. Joe Hemphill, Tennessee banking commissioner, stressed “upgrading” of both salaries and education of state bank examiners during his talk to the State Bank Division. During the 1975-76 fiscal year, he said, his department experienced a 12% turnover in staff, due, in large part, to the low $947,000 budget. During the 1976-77 fiscal year, on the other hand, turnover dropped to 5%, due, in part, to increased salaries made possible by a $1.1 million budget. He stressed the importance of this program in retaining qualified examin ers. Currently, he said, the department has retained more examiners with five or more years’ experience than ever be fore in the department’s history. He also pointed out that examiners are encouraged to continue their bank ing education by attending various types of banking and specialized schools. About 55% of the examining staff is now enrolled in some sort of school, Mr. Hemphill said. His department, he said, is charged with the responsibility of examining each state bank at least once a year. During the past year, he said, the de partment accomplished this task for the first time. The independent banker’s viewpoint was presented by Thomas C. Brickie, legislative counsel, Independent Bank ers Association of America, during the meeting of the Independent Bankers Division. Mr. Brickie’s theme was that change is inevitable, but there’s no need to rush into it without weighing the con sequences. One of the areas of forthcoming change is E F T S , he said. The National Commission on E F T is scheduled to file its report to Congress in October. “With the fanfare of hearings, press releases and off-the-cuff remarks,” he said, “the industry has been advised that E F T is the banking of the future. State legislatures are wrestling with the enactment of laws on a subject for which few appreciate the impact. In MID-CONTINENT BANKER for June, 1 9 7 7 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Bank, Knoxville, following election of officers. RIGHT: F. G. Cavin (I.), e.v.p., First American N at'l, Nashville, and George Doak, e.v.p., Kan sas Development Credit Corp., Topeka, at joint session of State and Nat'l Bank divisions. Nebraska, the banking community la bored to establish its N ETS system only to have the Department of Justice raise questions well after the fact. As of to day, the two largest banks in the state have elected to withdraw from the statewide program. “Some states have enacted sharing concepts,” he continued. “Others con sider moratoria. Still others linger in the limbo of indecision. Meanwhile, a quick review of the trade press reports on stories from the manufacturers, the larg er banks and the regulators suggesting that E F T will be with us in the morn ing“Mind you,” he said, “I don’t believe an ostrichlike attitude is the answer. On the other hand, banking would be wise to ‘go slow’ in its efforts to shift into E F T systems.” Also speaking at the State Bank Di vision meeting was Thomas A. Wise man, general counsel, Interest Rate In formation, Inc. ( IR I), Nashville. IR I was created last year as a lobbying group favoring calling the constitutional convention referred to by President Willson. The group now is reaching out to every sector of the state’s population with brochures, films and speeches in schools, civic groups and on TV to at tract support of the convention’s call to consider changes on interest rates T h e First N a tio n a l Bank of jackson PO. BOX 309/)ACKSON, TENNESSEE 38301 /901-423-BANK Member F.D.I.C. 93 LEFT: Harlan Matthews (I.), Tenn. treas.; R. Arch Fitzgerald, State Bank Div. ch., and e.v.p., Cleveland Bank; Thomas A. Wiseman, gen eral counsel, Interest Rate Information, Inc., at joint session of State and N at'l Bank divisions. CENTER: Laurence E. Kreider (I.), e.v.p., Conference of State Bank Supervisors; and Joe Hemphill, Tenn. com and other issues. Mr. Wiseman said the eliciting of support on the part of the public is ex tremely difficult. “We have got to con vince consumers we don’t want a higher interest rate either,” Mr. Wiseman said. “What’s important to us is the spread” between cost of money and the return on lending it. He urged bankers to make efforts to impress, not only bank employees, but people in their communities that there’s nothing wrong with the state legislature having the power to set interest rate maximums. If it was wrong, 47 other states would not permit the practice, he said. He said about 95% of the state’s banks are IR I members. “We are capital importers” in Tennesee, Mr. Wiseman said. “We don’t gen erate enough capital to fuel our economy and when capital leaves the state, we lose jobs. When we lose jobs we lose sav ings. And there is enough competition with other financial institutions now without another 1974 period of tight money. Imagine how competition would be affected if your money rates rose again like that?” Jack R. Bulliner, president, First State, Henderson, was elected TBA president, succeeding Mr. Willson, who assumed the chairmanship of the as sociation. Elected president-elect was Andrew Benedict, chairman, First American National, Nashville. New first vice president is G. Robert Taylor, president, Merchants Bank, Cleveland, and James R. Fitzhugh, president, Bank of Ripley, was elected second vice presi dent. Newly elected directors include George Morgan, chairman, Valley F i delity, Knoxville—for east Tennessee; Robert E. Curry, president, First Na tional, Pulaski—for middle Tennessee; and Quincy McPherson, executive vice president, Union Planters National, Memphis—for west Tennessee. New State Bank Division officers are Jere Williamson, president, First State, Brownsville—chairman; J. W. Hudson, 94 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis missioner of banking, at State Div. meeting. RIGHT: Tom Brickie, legislative counsel, Independent Bankers Assn, of America; Charles P. Wilson, ch., Independent Bankers Div., and pres., Commercial Bank, Paris, and James R. Fitzhugh, outgoing Independent Bankers Div. ch., and pres., Bank of Ripley. president, Bank of Madisonville—vice chairman; and James W. Holmes, senior vice president, Carter County Bank, Elizabethton— secretary. Bruce E. Campbell Jr., chairman and president, National Bank of Commerce, Memphis, was named chairman of the National Bank Division. The Independent Bankers Division elected Charles P. Wilson, president, Commercial Bank, Paris, as chairman; James R. Austin, chairman, Peoples National, Shelbyville, as vice chairman; and J. D. Clinton, vice president, Brownsville Bank, as secretary. D. R. Nunn, president, Bank of Halls, was elected to the ABA’s governing council for a two-year term. • * BMA Publishes Proceedings senior vice president, and marketing di rector, First National, Atlanta. Taking th e M ystique out o f E F T is available at $15 per copy to BMA members only. Requests for the publi cation should be directed to Order De partment, Bank Marketing Association, 309 West Washington Street, Chicago, IL 60606. O f 1976 EFT Conference: Taking Mystique Out of EFT' C H IC A G O — Taking th e M ystique Out o f E F T is a new 134-page refer ence work from the Bank Marketing Association. The book is based largely on proceedings from the BMA’s 1976 E F T Conference. The book explores and evaluates E F T , with chapters covering topics in cluding: “Related E F T Developments,” by Lester Goldberg, vice president of banking, Booz, Allen & Hamilton, Inc., San Francisco; “ATMs,” by William M. Randle, vice president-marketing, Atlantic Bancorp., Jacksonville, Fla.; and “Putting E F T in Proper Perspec tive,” prepared by Paul Armer, chair man, Special Committee on E F T , Cen ter for Advanced Study in Behavioral Sciences, Stamford, Conn., and present ed by Robert T. Berdue, vice president marketing research department, South Carolina National, Columbia. Also, part of the book is a three-part course on fundamental E F T concepts, which is geared to reflect marketing and operational aspects of the subject. In addition, two presentations delivered at the E F T Conference are included in T aking th e M ystique Out o f E F T : “E F T and the Implications to the Bank Marketer,” by Joyce A. Healy, vice president, Manufacturers H a n o v e r Trust, New York City, and “How to Advertise E F T ,” by Allan D. Nichols, R enew able Scholarships E n co u rag e Banking Studies European American B a n k , N ew York City, has been giving future bank ers a “shot in the arm,” thanks to the $3,000 scholarships it awards each year to high school seniors who will attend Hofstra University’s School of Business. This is the second year that the bank has awarded the three scholarships to winners from among applicants attend ing high schools in European Ameri can’s area. Recipients of the scholar ships must have an interest in business studies—banking in particular—must have leadership ability, outstanding scholastic achievement and must have been accepted as freshmen at Hofstra, located in Hempstead, N. Y. Further more, as long as scholarship students maintain a high grade average in col lege, the scholarships will be renewed, resulting in a value of $12,000 to the recipient. Scholarship students also are eligible for internships and part-time and sum mer employment at European Ameri can Bank. MID-CONTINENT BANKER for June, 1977 W hen you can’t offer Profit Sharing and Retirem ent Trust Services of your ow n... offer ours. Call on our experience. time consuming functions. We save you the ex pense of developing a full-service Trust Depart ment of your own while helping you to remain competitive in your community. Now, through the Corres Get full information on the pondent Banking Division of Third National, you can many and varied services from the largest Trust Division in offer your customers the Tennessee. Talk to the Third complete Trust Services they need, includ National Correspondent Banker ing Profit Sharing/Retirement Plans developed who serves your area today .Our individually to fit each company situation. We relieve you of almost all responsibilities, includ Tennessee WATS line is (800) 342-8360. In neighboring states,'' ing management of the ongoing investment, dial (800)251-8516. in n a s h v ille legal work relative to IRA, and various other Member FDIC Celebrating 50 years of service. MID-CONTINENT BANKER for June, 1977 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 95 NEWS From the Mid-Continent Area Alabama following service with Worthen Bank, Little Rock. He is presently senior vice president and director of marketing. ■ JAM ES S. GASKELL JR ., president and CEO, First Alabama Bank, Mont gomery, has been elected a director of First Alabama Bancshares, multibank HC to which the bank belongs. ■ F IR S T NATIONAL, Newport, has elected Tony D. Herring a vice presi dent and promoted Mrs. M a u d ie Michaels to assistant cashier. Mr. Her ring was formerly executive vice presi dent, Jackson County National, Tuckerman. Mrs. Michaels joined the bank in 1969 as a secretary. ■ F IR S T NATIONAL, E l Dorado, has promoted Johnny A. Benson from auditor to assistant vice president and operations manager, named Lawrence L. Powell auditor and placed Vice President Joe W. Miller in charge of money management. ■ BANK O F FLO R EN C E b ro k e ground last month for its new head quarters building. It will be located at Pine and Alabama streets, adjacent to the present temporary office, and will be completed in the spring of 1978. The three-story structure has been de signed in Williamsburg style. ■ JAM ES E. BRANUM has been named president, Wilcox County Bank, Camden, while Mark Lyons III has been appointed chairman and executive vice president. In addition, R. Allen Couch Jr. has been elected assistant vice president. Arkansas ■ JAM ES JE T T has been elected to the board of First National, Hot Springs. He joined the bank in 1971, HARROW SMITH C O M P A N Y Union National Bank Bldg. 501/374*7555 Little Rock, Arkansas J. E. WOMELDORFF, Executive Vice President 96 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis ■ F IR S T NATIONAL, Osceola, has promoted Mrs. Lois L. Watts to vice president and Don H. Hook to as sistant vice president. ■ PEO PLES BANK, Russellville, has promoted Harold E. Hayes and Mrs. Mary Louise Hoffman to vice presi dents and Mrs. Glenna C. Long to trust officer. Elected assistant cashiers were Mrs. Luvene Carter, Mrs. Mary Lee Boling, Mrs. Mary Moran and Mrs. Virginia Russell. Illinois ■ HARRIS BANK, CHICAGO, has announced a series of staff changes. Senior Vice President Rolland S. Carl son has been named department execu tive, operations; Senior Vice President Thomas G. Lynch, deputy operations executive; Vice President Ben T. Nel son, replacing Mr. Carlson as group executive, metropolitan group; Vice President Edward W. Lyman Jr., from division 6 administrator to division A administrator; Vice President Kenneth R. Keck from division administrator, business banking, to division 6 admin istrator; and Vice President Charles H. Davis, who was in division 1, to di vision administrator, business banking, In addition, the trust department now reports to the Harris Bank executive office through Vice Chairman Stanley G. Harris Jr., following the June re tirement of Vice Chairman Chalkley J. Hambleton, to whom the department had been reporting. The operations de partment reports to President Charles M. Bliss. Executive Vice President Theodore H. Roberts has assumed new duties involving the overall asset/lia bility management of the corporation, including responsibility for the bank’s investment securities portfolio in the money market division. ■ THOMAS L. D O C K W EILER and Marven Tillin have been promoted to assistant vice presidents at Chicago’s National Boulevard Bank. ■ M ERCHANDISE NATIONAL, Chi cago, has announced the opening of its Apparel Center Facility and that it has applied for permission to open another facility at the Germania Club Building. ■ AMERICAN H ERITA GE BANK of Granite City is the new name of Ameri can National, following its conversion to a state bank. ■ JAM ES M. SHIPTON joined First Chicago Corp. and its principal sub sidiary, First National, Chicago, May 1, as a senior vice president. He heads the bank’s personnel department and is responsible for personnel and humanresources functions for the bank and corporation. Mr. Shipton formerly was with the Dayton-Hudson Corp., Min neapolis-based retailer, as vice presi dent, personnel and communications. ■ B A N K O F B E L L E V I L L E has opened its Swansea Motor Bank at Belt Line and Route 161. The facility fea tures early hours— opening at 7 a.m.— and six drive-up stations. During open ing ceremonies for the facility, a ribbon of two-dollar bills was cut and then donated to the Easter Seal Drive. Easter Seal Child Stephen Bardmass (fore ground) watches ribbon-cutting ceremonies for new Swansea Motor Bank of Bank of Belle ville. At microphone can be seen Harry E. Cruncleton, pres., while applauding behind Stephen are Robert Wiltshire, bank treas. (I.) and Richard Lignoul, then Illinois commissioner of banks and trust companies. After ribbon of two-dollar bills was cut, it was presented to Easter Seal Drive. MID-CONTINENT BANKER for June, 1977 The Illinois Team of the H arris Bank. These are the Harris Bankers who travel in Illinois, outside of metro politan Chicago. They are dedicated professionals. But, best of all, they’re backed by management that is truly committed to a winning effort. When questions or problems arise, call any of these banking experts at (312) 461-2121. You will get the help you need. You should have a Harris Business Banker.SM HARRIS U £= BANK Harris Trust and Savings Bank, 111 W. Monroe S t| Chicago, IL. 60690. Member F.D.I.C.,.Federal Reserve System. MID-CONTINENT BANKER for June, 1 977 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 97 I l lin o is (Continued) These a re tw o view s o f ne w home o f First State, Pekin. Tw o-level structure, located next to Pekin M a ll, features drive-up lanes and pa rking a re a on top level and another pa rking a re a on lo w er level. ■ F IR S T STATE, Pekin, has moved into its new building next to the Pekin Mall. The exterior features exposed ag gregate precast panels rounded at the building comers. Windows are of tem perate insulated solar bronze glass for W ide expanse o f tem p erate insulated solar bronze glass w indo w s on lo w er level contrasts w ith exposed a g g re g a te precast panels on build ing's top level. maximum light control and energy savings. The lower level houses the bookkeeping and safe deposit depart ments, vault area, coupon booths, con ference rooms, employees’ lounge and rest rooms. On the first floor is a public lobby, which has four tellers windows with provisions for future expansion, three private offices, the new accounts and installment loan departments and an open officers’ area. The building has four drive-up lanes, an after-hour de pository and one manned window. The building was designed and constructed by Commercial Design, Inc., St. Louis. Lobby o f new home o f First State, Pekin, is open and has earth-to ne colors enhanced w ith vinyl w a ll covering and w a ln u t tellers fixtures. C arpeting also has earth-tone shade highlight ed by orange and gold. In d ia n a ■ JOHN R. WALSH, vice president, Indiana National, has been named to the board of trustees of Butler Univer sity. He joined the bank in 1965 and is director of public relations. ■ INDIANA NATIONAL, lis, has elected four vice Robert B. Peck, Bruce E. Michael R. Shutters and Schneider. Indianapo presidents: Whitham, Robert E. ■ MERCHANTS NATIONAL, Au rora, has promoted Dale Jourdan, Roger Hart and Peter A. Dickes from assistant cashiers to assistant vice presi dents; Joel A. Binder from assistant trust officer to assistant vice president; Steve Schultz to assistant cashier; W il liam F. Adkins to controller; and Scott Everhart to data processing officer. William C. Glenn was elected a direc tor. He is president of a roofing firm. Died: William D. Backman Sr., 75, chairman, First National, Aurora, on April 24 in a Colorado Springs, Colo., hospital. He was chairman, Aurora Cas ket Co. 98 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis ■ R I C H A R D O. C A L H O U N has joined the Central Division of Bank Building Corp., St. Louis, as a con sultant services manager. He represents the firm in west central Illinois. Mr. Calhoun had been regional sales man ager for Technicolor, Hollywood, Calif. Before that, he had been with IBM in St. Louis. ■ E R N EST BORGMAN has been elected chairman, First National, Au rora, to succeed William D. Backman Sr., 75, who died April 24. William D. Backman Jr. was elected to fill the board vacancy created by his father’s death. THIBAULT Facility Goes M odular PARKER ■ DEAN R. TH IBA U LT has joined Hutchinson National as agricultural loan and correspondent bank officer. He goes there from First National, Wichita, where he had served as as sistant vice president, correspondent banking. C entral Bank has opened its N orthw est Facility in W ichita in a m odular building constructed in Las Cruces, N . M ., by Diebold, Inc., which also m anufactured the facility's vau lt. The three drive-up lanes a re covered by a canopy, and there a re inside teller w indo w s. The safe de posit v au lt has 513 boxes ranging in size from 3 x 5 x 2 2 inches to 10x 1 0 x2 2 inches. The 1 8 x l0 -fo o t v a u lt has a capacity for 9 00 safe deposit boxes. ■ DALE PARKER has joined division II, business development department, United Missouri Bank, Kansas City, Mo., as assistant cashier. He has re sponsibilities for an area including Kan sas. MID-CONTINENT BANKER for June, 1977 Security Nat'l, KCK, Holds Grand Opening L o u is ia n a ■ DAVID M. CAM PBELL, vice presi dent and senior trust officer, First Guaranty Bank, Hammond, has been named corporate development manager. He joined the bank in 1975, going from Union Planters National, Memphis, where he was trust development officer. (C w W P OPENING » n s ■ RICHARD P. GUIDRY, Galliano businessman and former state legislator, has purchased the majority of the out standing stock of Community Bank of LaFourche, Raceland. A new bank president will be named shortly. ■ W H ITN EY NATIONAL, New Or leans, has promoted William T. Catchings from comptroller to vice president, Philip E. Doolen from vice president to vice president and auditor and Gerald J. Catoire from auditor to comptroller. Named assistant vice presidents were A th re e-d ay grand opening w a s held in A p ril to introduce the public and correspondent bankers to the ne w eight-story headquarters building o f Security N a tio n a l, Kansas City, Kan. In left photo, bank C hairm an W . L. " B ill" W ebb er, delivers humorous rem arks to group o f corre spondent bankers atten din g the opening, w h ile Vice President Bob Fitzpatrick chuckles in background. In right photo, bank President G ra y B reidenthal (I.) and Kansas City M a yo r Jack Reardon jo intly flip switch th a t activated glass-shelled elevato r in bank lobby to rise and slice through grand opening ribbon. tional and First Kentucky Trust, also of Louisville. WHEELER ■ A. DALE W H E E L E R has been pro moted from executive vice president to president, East Side Bank, Wichita. He entered banking in 1964 and served in a number of institutions prior to joining East Side Bank in 1973. ■ SOUTHERN D E P O S I T B A N K , Russellville, has promoted Kenneth Coleman and John Sheffield to assistant vice presidents. ■ J. DAVID GRISSOM has been elected chairman and CEO, Citizens Fidelity Corp., Louisville, succeeding Maurice D. S. Johnson, who retired. Mr. Grissom continues as chairman and CEO of Citizens Fidelity Bank, posts CATOIRE GRISSOM K e n tu c k y ■ JA M ES H. GOODNIGHT has been promoted from assistant vice president to vice president, commercial loan, American National, Bowling Green, while Arvil G. Rainey Jr. has been named assistant cashier, installment loan. ■ GEORG E R. W O M BW ELL has been promoted from vice president and treasurer, First K e n t u c k y N a t i o n a l Corp., Louisville, to senior vice presi dent and treasurer. He joined First Na tional, Louisville, in 1972 as a corporate services officer. First Kentucky Nation al is the parent company of First Na he has held since April, 1976. Daniel C. Ulmer Jr. is president of the bank, and Joe M. Rodes is president of the HC and executive vice president/ finan cial services of the bank. Both are HC directors. MID-CONTINENT BANKER for June, 1977 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Louis Burke Jr., Joseph X. Hymel, Fred L. Rittler, Charles L. Schomaker Jr., Herbert F. Steckler and James M. Whalen. James H. Deterly, Gerard F. Lowe and John W. Muery have been made assistant cashiers. Mr. Catoire is president of the local BAI chapter. M is s is s ip p i ■ TH R E E PROMOTIONS have been announced by Deposit Guaranty Na tional, Jackson. Charles H. “Dick” King II and James M. Outlaw Jr. were made branch officers, and John B. Madden III was named credit card officer. Mr. King, with the bank since 1972, is assistant manager, Five Points 99 Office in Jackson. Mr. Outlaw, also with the bank since 1972, is assistant manager, Maywood Office in Jackson. Mr. Madden went to Deposit Guaranty in 1970 and is on the Visa department’s marketing staff. ■ B IL L IE SHAW of First National, Jackson, was a featured speaker on the faculty program at a recent Newcomer Workshop in Atlanta. The workshop, second of its kind, was presented by Hubbard & Associates, Wheaton, 111., a management consulting firm. Mrs. Shaw’s First Friend newcomer program places emphasis on personal service with a personal touch in getting new comers settled. She spoke on how to convert leads into new customers. The two-day Atlanta seminar dealt with such subjects as researching leads, how to fulfill newcomers’ expectations, value of a newcomer program and newcomer marketing techniques. M is s o u r i * RON RIGDON, assistant vice presi dent and manager, Ward Parkway Of fice, Traders National, Kansas City, has been elected president, Kansas City AIB Chapter. Other chapter officers elected were: first vice president— Sarah Weaver, assistant vice president, Westgate State, Kansas City, Kan.; second vice president—Betty K. Waite, James P. Hickok Dies James P. Hickok, 74, died A p ril 30 in St. Louis, a p p a re n tly o f a heart attack. M r. Hickok en tered banking in 1926 a t A rkansas N a t'l, Hot Springs, a nd, in 1930, w e n t to Clayton N a t'l (no w St. Louis County Bank). He la te r served as pres, o f Manchester Bank and o f M a n u fa c turers Bank, both o f St. Louis. M r. Hickok joined First N a t'l, St. Louis, in 1950 as e.v.p., advancing to pres, in 1957 and ch. and CEO in 1962. He w as instru m ental in form ing th a t bank's paren t HC, First Union Bancorp., St. Louis, in 1969, and served as its first pres, until his 1971 retire ment. M r. Hickok w a s a past pres., Missouri Bankers Assn, and St. Louis C learing House Assn. 100 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis ■ DON VAN SO ELEN has been ap pointed senior vice president and Los Alamos Office manager, First National, Santa Fe. A past treasurer of the New Mexico Bankers Association, Mr. Van Soelen joined First of Santa Fe in 1952. Prior to his most recent appointment, he had served as vice president, com mercial lending. GEGEN RIGDON assistant cashier, Laurel Bank of Kan sas City; secretary—Nannetta Hughes, assistant cashier and safe deposit man ager, United Missouri Bank of Kansas City; and treasurer—Dale G. Rapp, assistant vice president and cashier, First National, Liberty. ■ M ICHAEL W ILLIAM GEGEN has been named president and CEO, First National, Liberty, succeeding William B. Pence, who has been elected chair man. Mr. Gegen goes there from First National, Kansas City, where he had served as vice president, commercial division. He joined First of Kansas City in 1968. Mr. Pence joined First of Liberty in 1946 as a teller, advanced through the ranks and was named pres ident in 1959. ■ KEN NETH HAEUBER, vice presi dent, has been appointed to the ad ditional position of chief operating of ficer at Normandy Bank, St. Louis County. In addition, Lee R. Parks has been named vice president; Randolph L. Meyer has been elected cashier, and Eugene F. Weber has been appointed auditor. Gilbert Alsmeyer, executive vice president and cashier, has retired after 30 years with the bank, but con tinues there part time. ■ W. J. LUM PE has been elected chairman, Community Bank of Warsaw. Succeeding him as president is Ken neth F. Kammeyer, while John E. Wiest, formerly vice president, has been promoted to executive vice presi dent. N ew M e x ic o ■ D A RRELL DWAIN BERR YH ILL has joined Liberty National, Lovington, as vice president and Avenue D Branch manager. His banking experience in cludes service with institutions in Texas and Florida. ■ H E R B E R T K. “K IT ” JOHNSON has joined New Mexico Bank, Hobbs, as loan officer. He formerly was assistant manager, Pacific Finance Co., Hobbs. V A N SOELEN ■ DAVID A. A TER has been appoint ed executive vice president, director and board secretary, First National, Santa Fe. He joined the bank in 1970 and has overall responsibility for First National’s Santa Fe offices. a CARLSBAD NATIONAL has pro moted Mrs. Ruth H. Loy to vice presi dent and assistant trust officer, Richard W. Doss to assistant vice president and branch manager and Mrs. Maxine Garringer to assistant cashier. ■ W ESTER N BANK, Albuquerque, has promoted Michael T. Briggs to vice president and branch administrator. Linda Jenkins has been elected public relations director, D. M. (Chuck) Greengrass has been elected assistant vice president and Bill Piskorski and Mike Pettenuzzo were named assistant cashiers. ■ R O BER T J. RIGONI has resigned as executive vice president, Citizens State, Raton. O k la h o m a ■ MORRISON G. TUCKER, chair man, United Oklahoma Bank (formerly Stock Yards Bank), Oklahoma City, has announced Fed approval of formation of a one-bank HC for the bank. In the near future, a plan for formation of such a firm will be presented to United Oklahoma stockholders. Before the plan is submitted to shareholders, the new HC’s securities will be registered with the SEC. The HC’s name will be United Oklahoma Bankshares, Inc. Mr. Tucker, former Oklahoma Bankers Association president, also said that, subsequent to the HC’s formation, he and John E. Kirkpatrick, who together own a sub stantial majority of United Oklahoma MID-CONTINENT BANKER for June, 1977 Bank’s outstanding stock, will sell more than a 50% interest in the HC to 16 other banking organizations in Okla homa. Aggregate resources of these banks and their HCs exceed $1/4 billion. Messrs. Tucker and Kirkpatrick will re tain important financial interests in the company. ■ H. DALE SC H RO ED ER has been named senior vice president/ operations, Liberty National, Oklahoma City. Dur ing the past year, he headed the new Pioneer Savings & Trust Co., Muskogee, after having been with Liberty Na tional from 1956-76. He rejoined the latter bank in April as head of the operations department. In other action, Liberty National named John P. Roberts assistant vice president, legal division. An attorney, he previously was with a Tulsa law firm. ■ F R E D A. SE TSE R , senior vice president and marketing director, Fourth National, Tulsa, has formed a new corporation with V. Lamar Miller, investor and principal owner of several Tulsa-based businesses. The new firm will be called Sunbelt Holding Corp. Entities involved at the initial stage are: Fortunon Investments, Ltd., a Tulsa area land holding and develop ment company; International Synergistics Co., Inc., a computer-oriented full-service accounting firm; and Best Means Corp., which has the rights to and will manufacture and market an end-roll irrigation system in the south western U. S. and Middle East coun tries. Mr. Setser will be president and chief operating officer, and Mr. Miller will be the other principal officer. Mr. Setser joined Fourth National in 1968. ■ F IR S T NATIONAL, Oklahoma City, has named Ed Porter senior vice presi dent and head of the real estate loan division. He formerly was vice presi dent, real estate and mortgage loan division, Republic National, Dallas. First of Oklahoma City has promoted Raymond F . Kolker from trust officer to assistant vice president and trust officer and John H. Brown from as sistant cashier to trust officer. Named assistant vice presidents were Ronald W. Cockings and Jerry P. Enloe. MILLER CLAY GRAY PHILLIPS FERGUSON ■ U N ITED OKLAHOMA BANK, Oklahoma City, has elected Richard J. Miller and Jay C. Walderich vice presi dents. Mr. Miller is in the commercial loan department and Mr. Walderich is in the business development depart ment. The bank is the former Stock Yards Bank. Permission to change the name was granted by the Oklahoma Banking Commission. ■ TERRY L. W E ST has been named a vice president, Security Bank, Ponca City. He had been an F D IC examiner the past seven years, stationed in Denver. Another new Security Bank officer is Cary R. Meister, who was named an assistant cashier. He had been in the Ponca City office of the Prudential Life Insurance Co. John R. Stanley and L. J. Chaufty were pro moted to second vice presidents, and Larry Buck and Ray Hargis were ad vanced to assistant vice presidents. ■ F IR S T BANK, Catoosa, has named Gene Dillard and J. L. Fielder vice presidents. Mr. Dillard is also cashier. He was formerly cashier at Southwest Tulsa Bank. Mr. Fielder was formerly with Guaranty National, Tulsa, where he was an installment loan officer. ■ B IL L M ATHEW S has joined City National of Sayre as president. He formerly held a similar position at Liberty National, Lovington, N. M. real estate officer to senior vice presi dent and Hill Ferguson III from as sistant vice president to vice president. Mr. Ferguson is in the correspondent bank department. ROBERTS ■ KEN NETH L. R O BERTS, presi dent, First American National, Nash ville, last month was elected president and CEO, First Amtenn Corp., Nash ville-based bank HC to which the bank belongs. He succeeds T. Scott Fille- John E. Brown Dies ■ JOHN W. CLAY, senior chairman, Third National, Nashville, has been elected president of the bank’s HC, Third National Corp., succeeding W ar ren P. Gray. Mr. Gray retired, ending a 43-year banking career. He retired last October 31 as vice chairman of the bank, but had agreed to remain in the HC post until the annual share holder’s meeting this spring. In other action, the bank promoted Donald F. Phillips from vice president and senior MID-CONTINENT BANKER for June, 1 977 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis WALDERICH John Edwards Brown, 75, retired ch., Union Planters N a t'l, Mem phis, died M a y 15 a fte r a long illness. He en tered banking in 1922 as cash., First State, Henderson. He became pres. 17 years la te r and w as its ch. a t the tim e o f his death. M r. Brown joined Union Planters' correspon dent dept, in 1944, le ft tw o years la te r to become e.v.p., N a t'l Bank of Commerce, Jackson, returned to Union Planters in 1948, became e.v.p. in 1952, pres, in 1955 and ch. & CEO in 1963. He re tired in 1967 and m oved from Memphis to Henderson. M r. Brown w as pres., Tennessee Bankers Assn., in 1948. lot brown Jr., who resigned to enter pri vate business. Andrew Benedict, bank chairman, was reelected HC chairman. New Bank Bldg. Opened This is an artist's sketch o f the new M ain Office o f First Tennessee Bank, C ookeville. The bank's nam e w a s changed from First N atio n a l (which appears in this sketch) during the building's construction. The contem porarystyled structure has w h ite cast stone, dark solar glass and a colonnade concourse. There a re fou r drive-up lanes and a 24-hour ATM. Interior m aterials include Ita lia n Perlato m ar ble, oriental grass cloth, pecan and oak woods. The boardroom ta b le is unusual in th a t it is bo at shaped—32 fe et long, eight feet in the center and four fe et on each end. The building, land and furnishings cost $ 2 V2 m illion. The building w a s designed by James M . W il son, N ashville architect and engineer, w ho w o rked w ith his subsidiary firm , Interior W o rld, N ashville, headed by Beverly A nder son, interior decorator. ■ LARRY D. G IBB has been named vice president and general manager, Continental Bank International (Texas), international banking subsidiary of Chi cago’s Continental Bank and located in Houston. James C. Cordell, a vice presi dent in Continental’s commercial bank ing services department, has been named head of the bank’s commercial representative office in Houston. ■ LYNNDA LOKEY, banking officer, Lubbock National, has been assigned to its expanded correspondent banking Tommie E. Stuart Dies Tommie E. Stuart, 56, s.v.p. and ag. loan dept, m gr.. First N a t'l, Fort W orth, died M a y 5 in an auto accident in Fort W o rth . M r. Stuart had been in agriculture and ranching 33 years and joined First of Fort W orth in 1968 as v.p. and ag. dept. m gr. He w as prom oted to s.v.p. in 1972. He previously had served First N a t'l, San Angelo. Prior to entering banking, M r. Stuart had w o rked as a county ag agent, fa rm and ranch m gr. i ind as exec, sec., Texas Angus C attle Breeders Assn. 102 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis division. She joins Vice President Brian Williams III, and her primary duties are to provide in-bank assistance to correspondent-bank customers. ■ JAM ES D. BERRY, president, Re public of Texas Corp., Dallas-based bank HC, last month was named chair man and CEO, succeeding James W. Aston. Mr. Aston remains on the HC’s board and is chairman, directors execu tive committee. W. C. Hatfield, former- data processing department. Mr. Barrentine, with the bank since 1974, man ages the personal banking center. The bank’s HC, FrostBank Corp., exceeded $1 billion in total assets for the first re porting date in its history last March 31. In addition, the HC recorded earn ings for the first quarter of 1977 total ing 680 a share, or $1.4 million. This is the highest level of profits achieved in the last seven quarters. ■ R. B EV ER LY RUST, chairman of the trust committee, Frost National, San Antonio, has been named outstand ing trust banker by the Texas Bankers Association’s Trust Division. ■ HOWARD H. TU RN ER has been named vice president, Continental Illi nois National, Chicago. Mr. Turner serves the bank’s Houston regional rep resentative office. BERRY • HATFIELD ly HC executive vice president, has advanced to its presidency. Mr. Aston, who served in the Republic organiza tion more than 31 years, is a former president, Texas Bankers Association. ■ BERRY L. ALLEN and Jerry Greenhill have been named vice presidents, Bank of the Southwest, Houston, and Michael E. Simpson was elected as sistant vice president. Mr. Allen was an assistant vice president; Mr. Greenhill retains the post of trust officer, and Mr. Simpson was a loan officer. ALLEN GREENHILL ■ FR O ST NATIONAL, San Antonio, has elected Robert D. Furner vice presi dent and promoted George A. Barrentine to vice president. Mr. Furner joined the bank in March and is in the Index to Advertisers * Aetna Business Credit ..................................... 43 American Express Co. (Money Order Div.) . 55 American Express Co. (Travelers Cheques) 8-9 Arrow Business Service, Inc............................ 17 Bank Building Corp........................................... Bank Marketing Association ......................... Bank of Oklahoma, Tulsa ............................... 48 70 7 Chase Manhattan Bank ................................... Christmas Club a Corporation ..................... Commerce Bank, Kansas City ..................... Commercial Nat’l Bank, Kansas City, Kan. Corporate Personnel ......................................... Creative Image .................................................. 11 56 10 74 56 42 Deposit Guaranty National Bank ................. Detroit Bank & Trust Co.................................. Downey Co., C. L................................................ Durham Life Insurance Co.............................. 12 38 45 57 Farmers & Merchants Bank, Centre, Ala. 91 Farmers Grain & Livestock Hedging Corp. 54 Financial P lace m e n ts....................................... 49 First Alabama Bancshares ............................. 90 First City National Bank, Houston .............. 41 First National Bank, Birmingham ............... 84 First National Bank, Jackson, Tenn............. 93 First National Bank, Kansas City ............... 67 First National Bank, Mobile ......................... 87 First National Bank, St. Louis ..................... 104 First Nat’l Bank of Commerce, New Orleans 53 Fourth National Bank, Tulsa ......................... 31 Globe Life & Accident Insurance Co........... 51 Harland Co., John H .......................................... Harris Trust & Savings Bank ....................... Harrow Smith Co................................................ Hendrix, Mohn & Yardley, Inc........................ Hibbard, O’Connor & Weeks, Inc................... 19 97 96 86 24 Illinois Bank Building Corp.............................. Insured Credit Services, Inc............................ Integon Corp......................................................... 62 59 39 Liberty Nat’l Bank & Tr. Co., Okla. City .. 2 MGIC Indemnity Corp. (D & O ) ..................... 61 MG 1C Mortgage Guaranty Insurance Corp. 32-33 Manufacturers Hanover Trust Co................. 6 Manufacturers Hanover Commercial Corp. 13 Memphis Bank & Trust Co.............................. 23 Mercantile Bank, St. Louis ........................... 5 Merchants National Bank, Mobile ............. 91 Mosler Safe Co............................................... 36, 69 National Stock Yards National Bank .......... 103 Northern Trust Co.............................................. 3 FURNER BARRENTINE Rand McNally & Co. (Banking Div.) .......... Rand McNally Randcard ................................. Republic National Bank, Dallas ................... 52 40 63 Scarborough & Co.............................................. Seneca Hotel ...................................................... Southern National Bank, Birmingham . . . . 22 75 88 Third National Bank, Nashville ..................... Travelers Express ............................................ 95 21 Union Bank & Trust, M ontgom ery............... United Missouri Bank, Kansas C it y .............. 86 15 Western Banker Publications, Inc................. Whitney National Bank ................................... 35 47 MID-CONTINENT BANKER for June, 1977 an open letter from Bill Thom as Some customers consider correspondent banking a business, some a science and others a profession. Perhaps it’s really a combination of all three, but we do our best to make it an art. That’s why we give our traveling officers the authority to make decisions and in sist that they keep themselves up-to-date on the various local agri-business trends. So, whateveryour correspondent problems may be, for knowledgeable solutions give us a call at 618-271-6633. Sincerely yours, https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis THE NATIONAL STOCK YARDS NATIONAL BANK NATIONAL STOCK \ ILLINOIS 62071 Work with a banker who knows what his bank can do for you. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis At First National Bank in St. Louis, our corre spondent bankers are trained in what our bank can do for you. Across the board. Department by department. The result is men with solid experience and individual authority. So they can make fast decisions for you on their own. They’re backed by a bank with strong, steady growth. And total banking capabilities including overline loans, bond department services, computer ized check collection, cash management systems. Plus our annual correspondent seminars where you can exchange ideas and learn about new profit opportunities. Get to know your First National correspondent banker. He knows his bank. He’d like to put us to work for you. First National Bank in St.Louis K| Member FDIC I B I B i
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