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, JTNENT BANKER
The Financial Magazine of the Mississippi Valley & Southwest
MAY
1,
1976
S ee P a g e 60
This issue
For First
In s t a llm e n t
on
P R O B LEM S I N BANKING
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Th e se P re s id e n t s
W ill S p e a k O ut
In M a y 15 Issue
Liberty Presents
Paul Nadler
on Electronic Funds
T ransfer Service
Paul Nadler Says:
Liberty Says:
“ EFTS developments will end local bank
customer geographic restraints. Banks of any
size will eventually be able to serve their
custom ers w herever they are. W ith EFTS,
people will be paid automatically through
automated clearing houses. They will be able
to borrow automatically through ‘credit cards’
and they will be able to make
withdrawals through ‘debit cards’ at
point-of-sale terminals everywhere.
To community banks, this pre
sents good news and bad news. It’s
good because banks can now fo l
low their customers anywhere in
our highly mobile society. But, it
will also breed intense competition.
Although people will want to re
main loyal to their local bank, if
it doesn’t offer competitive services and rates
...th e y will say, ‘Oh well, we are all Okla
homans or we are all Americans. . . ’ and will
switch to the bank that offers the same geo
graph ic fle x ib ility but be tte r rates and
services.
Each bank, then, will have to make sure it
is doing its job and doing it w e ll...fo r geo
graphic protection is sure to fade away.”
“ CFIECOKARD... doing more than ending
check cashing hassle for your custom er...
is just the initial step in helping you maintain
your competitive posture in a rapidly maturing
electronic environment.
A n tic ip a tin g the ‘sh a rin g ’ p ro visio n in
the re ce n tly passed Oklahoma legisla tion ,
CFIECOKARD was designed for cor
respondent bank participation. The
system is now in its first evolu
tionary s ta g e ...fro m verification
and guarantee to on-line deposit,
withdrawal and transfer of funds
transactions at point-of-sale and
automatic teller machines.
The CFIECOKARD system is operational today in Oklahoma, and
¡t wiM lead the way in to the
nationwide ENTREE Card system fortom orrow.
With Liberty’s help, you and your customers
can have in d iv id u a l local id e n tity w ith
CFIECOKARD’s complete range of EFTS on-line
capabilities... plus the national capability of
ENTREE Card.
If you want to maintain your leadership in
your community, contact Liberty’s Correspon
dent Department for assistance with all the
challenges and opportunities of EFTS.”
at your
LIBERTY
T H E B A N K O F M ID - A M E R IC A
Liberty National Bank and Trust Company P. 0. Box 25848/Oklahoma City, Oklahoma 73125/Phone 405/231-6164/Member FDIC
MID-CONTINENT BANKER is published 13 tim es annually (two issues in May) at 1201-05 B lu ff St., Fulton, MO 65251. May 1, Vol. 72, No. 5. Sec
ond-Class postage paid at Fulton, Mo. S ubscription: $10.
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Federal Reserve Bank of St. Louis
Everything about
the portfolio added up.
But the earnings.
A correspondent bank faced a big
problem.
Their million dollar portfolio wasn’t per
forming. And with rising expenses and de
creasing loan demands, it looked like they
wouldn’t meet their income goals in the years
to come.
Faced with this dilemma, they came to a
bank with a proven earnings record. First in
Dallas. Where a team of Asset and Liability
Management Specialists rolled up their
sleeves. And got down to business.
They started by looking long and hard at
the bank. Where it was and where it was go
ing. The debt structure, their customer pro
file, and a dozen other factors.
Then, after they knew the bank and the
town, they used their market knowledge and
the experience they had gained from manag
ing their own portfolio to recommend changes.
Like the wider spread between “ agen
cies” and “ governments. ” A strategy for ad
vance refunding maturities. And active man
agement of both assets and liabilities.
The result was a higher earning portfolio.
One that was better geared to market condi
tions. And supported by continuous, up-todate management strategy.
And all it took was good thinking. Based
on 100 years of experience and a concern for
the customer’s best interests.
If that’s the kind of creative thinking your
bank needs, call Charles Dunlap, Vice Presi
dent of our Correspondent Division at 214744-8030.
Because at First in Dallas, good banking
starts with good thinking.
Member F.D.I.C.
A subsidiary of
■ m First International Bancshares. Inc.
1(11}
Branch offices in London, Paris, Singapore and Cayman Islands. Representative offices in T okyo, Sao Paulo and Beirut.
MID-CONTINENT BANKER for May 1, 1976
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Federal Reserve Bank of St. Louis
3
You'vegotto
handit to
FirstMinneapolis.
We’re the student
loan administration
paperwork people.
Turn your paperwork over to the
Student Loan Servicing Center of the
First National Bank of Minneapolis.
We’re specialists. We’re geared with
the proper people and equipment
to take this load out of your hands
and save you money.
Over 325 lenders of every size
have found that First Minneapolis
Km
can actually make their student
loan programs more profitable.
We can probably give you a hand,
too.
Call us collect at (612) 370-4114.
The Student Loan Servicing
Center. First National Bank of
Minneapolis.
First
M inneapolis
Student Loan Servicing Center
First National Bank of Minneapolis
120 South Sixth St., Minneapolis, Minnesota 55402 • Member FDIC
4
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Federal Reserve Bank of St. Louis
MID-CONTINENT BANKER for May 1, 1976
For bankers w ho plan to build.
Free.
Coffee cup and coffee, to get you started.
Pencil and note pad, for your ideas. Eraser, for
your changes. Clipper, so that you won’t need
to bite your nails if you call us. Aspirin and Turns®,
to settle your nerves before we talk to you. Plus
information that addresses the problems you face
when you think about a building program. Do you
get a local planner; local builder? D o you want
the responsibility of training both?
W e have all the experts under one roof—planners,
designers, builders, interiors and furnishings
specialists. A ll your needs are satisfied by a single
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Federal Reserve Bank of St. Louis
money with our concept but you won’t know
for sure unless you talk to us.
For your free Rescue Kit, call 3 14 -5 6 7 -9 0 0 0 ,
or return the coupon.
Ted Luecke, President
HBE Bank Facilities
Subsidiary of HBE Corporation
717 Office Parkway
St. Louis, Mo. 63141
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In stitu tio n
A d d ress
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more from Mercantile...
Our resources are assets to you.
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Count on Mercantile. Where you count.
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(314) 425-2404 • St. Louis, Mo. • Member F.D.I.C.
6
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Federal Reserve Bank of St. Louis
MID-CONTINENT BANKER for May 1, 1976
Convention Calendar
The Financial M agazine o f the M ississippi Valley & Southw est
May
M ay 13-14: Robert Morris Associates Inter
national Lending Workshop, Chicago, Hyatt
Regency.
M ay 13-16: National Association o f BankW om en Inc. Rocky M ountain/W estern R e
gional Conference, Albuquerque, Hilton Inn.
M ay
16-18:
Bank
Marketing
Association
“ Train the Trainer” Seminar, Rosemont,
111., Holiday In n -O ’Hare.
M ay 16-18: A B A National Marketing Con
ference, New York City, W aldorf Astoria.
M ay 16-18: Missouri Bankers Association A n
nual Convention, St. Louis, Stouffer’s River
front Inn.
May 16-18: Bank Administration Institute
Southern Regional Convention, Oklahoma
City.
M ay 17-18: Robert Morris Associates Secured
Lending, Accounts Receivable, Inventory &
Equipment-Financing
Workshop,
Boston,
Copley Plaza.
M ay 18-22: Alabama Bankers Association A n
nual Convention, San Juan, P. R., Sheraton
Puerto Rico.
May 19-20: A B A L iability/A sset Management
Policy Decisions Seminar, Atlanta, Stouffer’s
Hotel.
M ay 22-26: Mississippi Bankers Association
Annual Convention, Biloxi, Biloxi H ilton/
Broadwater Hotel.
M ay 23-25: Tennessee Bankers Association
Annual Convention, Nashville, Hyatt Re
gency -N ashville.
May 23-25: Illinois Bankers Association A n
nual Convention, St. Louis, Stouffer’s River
front Towers.
May 23-26: Robert Morris Associates Finan
cial Statement Analysis Workshop, Chicago,
Airport Marriott.
May 23-28: Bank Marketing Association Es
sentials of Bank Marketing Course, Boulder,
Colo., University of Colorado.
M ay 23-29: A B A National School of Bank In
vestments, Dallas, Southern Methodist Uni
versity.
M ay 23-June 4: Bank Marketing Association
School of Bank Marketing, Boulder, Colo.,
University of Colorado.
M ay 24-25: A B A National Conference on U r
ban & Community Economic Development,
Washington, D. C., Lowes L ’Enfant Plaza
Hotel.
M ay 24-27: Association of Bank Holding Com
panies Annual Meeting, London, Grosvenor
House.
M ay 26-27: Robert Morris Associates Auto
mated Loan Information Systems W ork
shop, Houston, Hyatt Regency.
M ay 26-28: National Association of BankW om en Inc., L ake/M idw est/N orth Central
Regional Conference, St. Louis, Stouffer’s
Riverfront Inn.
M ay 30-June 4: Bank Marketing Association
School of Trust Business Development,
Boulder, University of Colorado.
M ay 30-June 11: Illinois Bankers Association
Illinois Bankers School, Carbondale, South
ern Illinois University.
May 31-June 2: AIB Annual Convention, St.
Louis, Chase-Park Plaza Hotel.
June
June 1 -2: Robert Morris Associates Loan
Policy
Workshop,
Chicago,
Continental
Plaza.
June 2 -3 : A B A L iability/A sset Management
Policy Decisions Seminar, Dallas, Fairmont
Hotel.
June 6-11: Kentucky Bankers Association
Kentucky School of Banking, Lexington,
University of Kentucky.
June 6-18: Stonier Graduate School o f Bank
ing, New Brunswick, N. J., Rutgers U ni
versity.
June 7 -8 : Robert Morris Associates Lending
to Banks & Bank HCs Workshop, San
Francisco, Hyatt on Union Square.
June 10-12: New Mexico Bankers Association
Annual Convention, Las Cruces, Holiday
Inn.
June 13-15: Bank Marketing Association Bank
Planning Conference, Oakbrook, 111., Drake
Oakbrook.
June 13-16: A B A National Ooerations & A u
tomation Conference, Washington, D. C.,
Washington Hilton.
June 15-17 : Kansas Bankers Association Bank
Management Clinic, Lawrence, University of
Kansas.
June 16-17: Indiana Bankers Association A n
nual Convention, French Lick, French LickSheraton Hotel.
FEATURES
38 DO WE NEED BETTER BANK SUPERVISION?
Yes, but due process of law must be protected
41 BANK SURVEILLANCE SYSTEM DEVELOPED
To fight problem-bank situation
44 ACTIONS NEEDED TO ESTABLISH CREDIT POLICY
The best one: don’t put bad loans on the books!
45 QUALITY SHOULD BE GOAL OF LOAN PORTFOLIO
But 'how do we get there from here?’
60 THE PROBLEM BANK SITUATION:
How do we avoid a repeat?
68 IBAA CONVENTION SPOTLIGHTS FINANCIAL REFORM
Financial Reform Act criticized
J. R ex D uwe
Jam es E. Smith
A. Robert A bboud
Richard L. Kattel
CO N V EN TIO N S
83 MISSOURI
70 FIRST TIMERS
75 ARKANSAS
99 OKLAHOMA
DEPARTMENTS
8 SALES/MARKETING
12 THE BANKING SCENE
18 MORTGAGE LENDING 32 AGRICULTURAL NEWS
22 TRUSTS
34 BANKING WORLD
16 COMMUNITY INVOLVEMENT 26 COMMERCIAL
LENDING
36 NEWS ROUNDUP
STATE NEW S
104 KANSAS
104 KENTUCKY
104 LOUISIANA
105 TEXAS
102 ALABAMA
102 ILLINOIS
103 INDIANA
104 MISSISSIPPI
105 NEW MEXICO
105 TENNESSEE
iiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiuiiiininiiiiiniiniiiininininiinninniiminnnniinninniniiiiniiiiiiiiiiiiiiiiiniiiiininniiiiiiiiiiiiininiiiiiiiinniiiuiiiniiniiiiiiiiiiiniiiiiiiiimiiniiiiiiiiiiiiniiiiniiiiiniiiiiiHiKii
Editors
Ralph B. Cox
Editor & Publisher
Lawrence W. Colbert
Assistant to the Publisher
Rosemary McKelvey
Managing Editor
Jim Fabian
Associate Editor
Daniel H. Clark
Editorial Assistant
Advertising Offices
St. Louis, Mo., 408 Olive, 63102, Tel. 314/
421-5445; Ralph B. Cox, P ublisher; Mar
garet Holz, A dvertising P roduction Mgr.
Milwaukee, Wis., 161 W. W isconsin Ave.,
53203, Tel. 414/276-3432; Torben Soren
son, A dvertising Representative.
MID-CONTINENT BANKER for May 1, 1976
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
May 1, 1976
Volume 72, No. 5
MID-CONTINENT BANKER is published
13 tim e s an nually (tw o issues in May)
by Commerce P ublishing Co. at 1201-05
B lu ff, Fulton, Mo. 65251. Editorial, execu
tive and business offices, 408 Olive, St.
Louis, Mo. 63102. Printed by The Ovid
Bell Press, Inc., Fulton, Mo. Second-class
postage paid at Fulton, Mo.
S ubscription rates: Three years $21; tw o
years $16; one year $10. Single copies,
$1.50 each.
Commerce Publications: Am erican Agent
& Broker, Club Management, Decor, Life
Insurance Selling, M id-C ontinent Banker,
Mid-Western Banker, The Bank Board
Letter and Program. Donald H. Clark,
cha irm an; Wesley H. Clark, president;
Johnson Poor, executive vice president
and secretary; Ralph B. Cox, firs t vice
president and treasurer; Bernard A. Beg-
gan, William M. Humberg, Allan Kent,
James T. Poor and Don J. Robertson,
vice presidents; Lawrence W. Colbert,
assistant vice president.
7
S e llin g /M arketing
No Cutbacks H e r e :
do with an economy drive in the U. S.
Postal Service that began several
months ago, the bank official indicates
the original decision to open the sta
tion came about when the neighbor
hood postal branch was closed.
Bank Offers 'New' Service
By Opening Postal Station
W ith the U. S. Postal Service cutting
back on service ancl eliminating many
small-town post offices, more publicoriented businesses may follow the
lead taken by Southwest Bank, St.
Louis. That institution, like many rural
groceries, has joined the ranks of postal
contract stations.
Southwest Bank, as with other con
tract stations, receives no federal funds
for the facility’s operation, except for a
$1 yearly stipend for the person in
charge of the station. But it is a good
"drawing card" for customers and helps
improve the bank’s good will.
“ The customers feel this is some
thing that allows them to do their post
office and bank business at the same
time, and it’s a great time saver,” a
bank official stated.
Southwest Bank must provide two
persons to run the postal station, but
Jam Spreads Loan Message
Custom ers of Southwest Bank, St. Louis, are
able to do banking and postal business under
one roof since bank opened this postal sta
tion. M ove cam e after local Post Office branch
w a s closed. Bank officials say extra bank busi
ness w ill cover cost of em ployees needed to
run station.
management there believes that cost
will be overcome by the extra business
generated by its presence.
Although postal authorities state that
the move by the bank had nothing to
First N ational of M artinsville & Henry County,
V a ., pushes installm ent loans by distributing
free jars of stra w b e rry ¡am w ith special labels
reading "W hen you need a little b read , re
m ember us!"
Oklahoma Bank Involves Directors in Year-Long New Business Campaign
b u s i n e s s p r o g b a m has
been started at Liberty National,
Oklahoma City, but it isn’t being con
ducted among the bank’s officers and
employees. Called “ Contributors,” the
new program was designed especially
for Liberty National directors and was
unveiled by Chairman J. W . McLean
at a board meeting early this year.
According to Mr. McLean, “ Con
tributors” offers an opportunity for the
directors to earn money for their fa
vorite nonprofit charities and civic
groups by encouraging increased new
business in several service areas.
The program is set up on a point
system, with a specific number of points
being assigned for new business in
creases in checking accounts, savings
accounts and investment certificates.
Points earned for boosts in personal
trust and estates, managing agency ac
counts, corporate trusts, stock transfer
agents, custodian agency accounts, em
ployee benefit trusts and others are
assigned depending on their relation
ship to income earned on deposit
services.
The point system is described by
Mr. McLean like this: Points are ac
cumulated from 1,000 to 10,000. D e
pending on the level of achievement,
a director may earn cash awards for
A
new
8
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Federal Reserve Bank of St. Louis
his favorite charity of $750, $1,875,
$3,750, $5,625 and $7,500. However,
there’s no limit on points earned and,
conceivably, they could go higher than
$7,500.
An unusual aspect of the campaign,
says Willis Wheat, Liberty’s senior vice
president-marketing, is that “ Contribu
tors” was named in honor of deceased
directors who still have family members
represented on the current board.
Awards for which the directors qualify
bear the names of these former board
members, although the cash contribu
tion itself is given to the charity in the
name of the director who earns it.
For instance, the Everest Award is
named for the late C. H. Everest, a
director from 1922-25, and his brother,
the late J. H. Everest, a board member
from 1923-53. C. H. Everest was the
father of the bank’s current honorary
chairman, Harvey P. Everest. The
Sewell and Simmons Award honors the
late Felix A. Sewell, a board member
from 1942-71, and the late Felix Sim
mons, a director from 1932-54. Mr.
Sewell served Liberty in several official
posts, including president and chair
man. Mr. Simmons was an officer of
Liberty before becom ing president of
his own Ardmore, Okla., bank in 1954.
As Mr. W heat points out: “ Liberty
felt this type of program would bring
a much more favorable response than
typical incentives of free trip offers and
gift items. As is the case with most
banks, Liberty’s board of directors is
comprised of men who are leaders in
the community and take an active role
in its welfare and development. ‘Con
tributors’ gives them an additional op
portunity to lend financial assistance to
many worthwhile organizations, while
actively contributing to the growth of
Liberty.”
Besides its obvious function as a
business development campaign, Mr.
McLean says “ Contributors” also is a
reflection of the bank’s attitude that
directors should be involved more
meaningfully in their banks’ marketing
goals.
“ W e believe,” adds Mr. McLean,
“ that the directors’ active participation
in the implementation of marketing
plans can have a tremendous effect on
a bank’s effectiveness in meeting the
needs of its banking public. While bank
marketing involves much more than
business development, a true marketing
program certainly isn’t complete with
out it.”
The campaign will run through next
Decem ber and is open to all directors
of Liberty National Corp. and Liberty
National Bank. * •
MID-CONTINENT BANKER for May 1, 1976
'BICENTENNIAL ...from Salem
Four very timely Bicentennial promotions from Salem:
• Georgetown Stoneware
• Silverplated Goblets
»1776 Stainless
• Yorktown Ironstone
. . . so appropriate during our 200th Anniversary celebration.
We have co-ordinated for the Bicentennial in product and packag
ing.
All Salem products are part of complete programs for generating
new customers and new deposits. They include a complete sup
port package:
displays and advertising materials, direct mail
MID-CONTINENT BANKER for May I, 1976
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
pieces, internal control and report forms, personnel training,
market exclusivity, successful track records, and return privilege
of unused merchandise.
Write for more information:
S A L E M C H IN A C O M P A N Y
SA LEM SILV ER S M IT H S
South Broadway Extension
Salem, Ohio 44460
Better yet, phone Jay Keller: (216)
332-4655
9
No French Fries:
Bank's New Building
Is Former 'Burger Stand
To paraphrase the ads of a nationally
known chain of fast-food emporiums,
“ Watch out, hamburger stands!” United
Missouri of Springfield has opened a
new facility in a redesigned building
that once served as a “ hamburger
heaven.”
grand-opening ceremony also were held
in which over 500 local business and
government leaders were guests.
The building has 5,400 square feet
of banking area and a large vault with
space for 4,000 safe-deposit boxes.
There is an officers’ area inside and
four drive-up lanes under a canopy out
side.
Total Selling Program:
Officer Calling Efforts
Get Boost From SAVVY
This is United Missouri of Springfield's new
facility's quarters. Building form erly housed
ham burger stand, but w a s com pletely rede
signed, obliterating all traces of p ast use.
The structure, which is located in
Springfield’s Battlefield Mall, now is undistinguishable from its former self, ac
cording to bank officials. To celebrate
its opening, United Missouri held a
“ sale” on most of the bank’s personal
services: personalized checks, install
ment loans, safe deposit boxes, travelers
checks, money orders and savings ac
counts.
To promote the opening, the bank
used newspaper ads with coupons in
combination with “ man on the street”
radio commercials. A reception and
COULD THIS
BE THE FIRST
BAN K SALE
IN HISTORY?
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New A d C a m p a ig n :
'W e Grew Up Together'
Recalls Heritage of Bank
“ W e Grew Up Together” is what
Frost Bank, San Antonio, has been re
minding its market in its 1975-76 cam
c&iPOHMmmi*
J
paign. The promotion focuses on the
of people it has helped through
11\ variety
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out Texas history.
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N e w sp ap er a d for new facility of United Mis
souri of Springfield proclaim ed "first bank sale
in history." M any personal services w ere of
fered at " sa le " prices during opening event.
10
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Frost Bank v
played in five different styles. There al
so is a Spanish-language version.
Institutional ads were run for a num
ber of weeks, then the product adver
tising phase swung into action. Since
the campaign will be used until the end
of the year, bank officials expect econo
my to be combined with quality, since
all ads were produced at one time.
Additionally, the “ W e Grew Up T o
gether” TV campaign was awarded a
silver medal at the 20th Annual Awards
Show o f the Art Directors Club of
Houston. It was the sole receipient of
a silver award in the T V category.
The campaign also has won the top
award of the Houston Advertising Club
annual competition. The “ Grand Prix
X IV 1975” award was given for the
best coordinated advertising campaign,
all media considered. Bank officials in
dicated that the “ W e Grew Up T o
gether” promotion would compete re
gionally, with regional winners eligible
for national competition.
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Commercial bank-marketing efforts
and officer call programs are in for a
boost, say officials of Princeton Part
ners, Inc., Princeton, N. J., which has
developed one such total selling pro
gram for its client, Town & Country
Bank, Flemington, N. J.
The goal of the effort, bank officials
state, has been to position the institu
tion as the business bank in the area
and to give working tools to the calling
officer.
Using the trademarked copy line,
"The Business Bank with SAVVY,” the
bank uses media advertising, direct
mail and in-hand sales tools for calling
officers. Unifying the program’s various
parts is a manual that explains, stepby-step, how the officer should do the
job. The manual also supplies work
sheets to ensure that the sales track is
being followed according to plan.
SAVVY’s success, says an ad agency
officer, is that it gains positive atten
tion from businessmen and positive ac
tion on the calling officer’s part. Officer
calls becom e more than “friendly visits” ;
they are selling opportunities.
Advertisements identify the bank’s
personality and roles it has played,
such as when the original Colonel Frost
sold Stetsons to ranchers or the busi
nesses it finances today.
Television, radio, o u t d o o r s ig n s ,
counter signs and statement stuffers
are used by Frost Bank to promote its
message. There are eight TV spots that
are coordinated with a like number of
print ads and several outdoor designs.
On the radio, seven spots are aired as
radio theater, along with a theme song
S&L Scores With Silliness
Here’s how an S&L in Long
Beach, Calif., scored with the public
by taking a silly craze one step fur
ther by holding a pet-rock “race.”
Since spring is a season associated
with madness, the S&L set up an in
clined “racetrack,” complete with
lane markers and start and finish
lines, in its lobby. Fifty pet rocks,
which were required to be unadul
terated, were entered in the compe
tition.
Prizes for the winners were ap
propriate: rock albums!
MID-CONTINENT BANKER for May 1, 1976
Jln invitation
P or
Wour Hand
cTo Participate in
PHe Jlmerican
devolution
dicentennial
Delight your customers, new and old and improve deposits and
community relations this Bicentennial year.
CO LU M BIA R EC O R D S presents eight top artists and musical
groups on one fine L.P. record including Anita Bryant, Kate
Smith, Mahalia Jackson, Robert Goulet, Mitch Miller, Andre
Kostelanetz, The New Christy Minstrels and the Mormon Taber
nacle Choir, performing America's most beloved compositions.
★ ★ ★ ★ ★ ★ ★ ★ ★
Check these important features then write or call today for the
details.
— $1.50 cost, delivered, allows free give aways or $1.76 self
liquidators.
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MID-CONTINENT BANKER for May 1, 1976
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
I!
T h e B a n k in g S c e n e
By Dr. Lewis E. Davids
Hill Professor of Bank Management,
University of Missouri, Columbia
Independents Face the N O W Onslaught
HE TH REE-DAY 1976 convention
in Hawaii of the Independent Bank
ers Association of America (IB A A )
now is history. During the convention,
reactions to presentations on EFTs and
controversial discussions on pending
legislation in Washington demonstrat
ed that a minority o f independent bank
ers support at least part of the recom
mendations of the FINE study, espe
cially the provision granting banks the
interest-rate differential now given to
thrift institutions, if the bank in ques
tion has at least 35% of its assets in
housing loans.
. . the s p re a d of the cost
of funds to ea rn in g s for S&Ls
has b een m o re attractive
than that of m a n y co m m e r
cial b a n k s. This esp ecia lly
app lies to w h a t should be
a d d e d to the in terest r a te —
the effective interest r a t e due to finder's a nd closing
f e e s ."
The independent banker who saw a
local newspaper during the convention
might have read that the statehouse in
Hawaii had passed a measure— subject
to Senate approval— to deter embezzle
ments and kickbacks by industrial-loan
companies, something the committee
report accompanying the measure noted
had seen “ phenomenal growth” in the
past five years. The independent bank
er undoubtedly would have concluded
that, as a result of these greater restric
tions on industrial-loan companies, bor
rowers would be encouraged to seek
personal loans from the more conven
tional (and lower cost), but more high
ly regulated, commercial banks.
Television programming also was in
teresting in Hawaii. One ad by an S&L
had the title of “ International Savings,”
12
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Federal Reserve Bank of St. Louis
a 5/1% demand account. The negotiable
order of withdrawal (N O W ) has ef
fectively leaped from the East Coast to
Hawaii!
Other S&Ls in that state had even
more spectacular commercials that ap
pealed to the personal saver. Pioneer
Federal of Hawaii’s T V commercial
featured a credit card that’s accepted
at supermarkets, a la Hinky Dinky.
On returning to the mainland, I
viewed an advertisement of Fidelity
S&L, which has 20 offices throughout
California, that was of interest:
“ How to make 5/4% interest on
your company’s checking accounts:
Your business depends on cash
flow funds, but sitting in a check
ing account, they earn nothing. A
Fidelity
Federal
Tel-Account
makes your cash-flow funds not
only available, but profitable as
well. Now they can earn interest
at 5/4%, compounded daily, day in
and day out. Just a phone call
from you and idle funds are trans
ferred from your savings account
that same day. It works the same
way for transfers back to your
checking account and there is no
charge for this special service.”
Since the S&L industry has been
given clearinghouse routing symbols in
only the past few months and, thus, is
able to offer the equivalent of N O W ac
counts at the personal and business
levels, it’s too early to say how many
individuals or businesses have switched
their accounts to S&Ls for the service.
It’s probable that businesses that
haven’t been borrowing from their
banks may be more inclined to do so
than those that have a borrowing rela
tionship.
However, the S&L industry certainly
is aware of this limiting constraint on
its expansion, and I think S&Ls are in
genious in providing a rationale that
will legally comply with lending to a
small businessman. The loan may not
be direct, as a commercial loan, per se,
but to the extent that S&Ls do issue
open-end mortgages on properties, resi
dences and multiple dwellings, one cer
tainly can see that a simple open-end
mortgage arrangement can permit some
degree of accommodation to business
men who have some real estate. Fur
thermore, property used as collateral is
likely to be more secure and less sub
ject to risk than the conventional loans
of commercial banks.
Let’s face it, the 5/4-year extension
of Regulation Q may have appeared
"Th e fact that com m ercial
b a n k s h a v in g p o rtfo lio s with
3 5 % in rea l-esta te m o rt
g a g e s a re eligible to p a y the
S&L ceiling on fu nd s at first
a p p e a r s to put them on
re la tiv e ly eq u a l fo o tin g , in
t e r e s t - r a t e - w i s e f with the
thrifts/ but this is m o re illu
sion than fa ct."
to be the temporary palliative to the
unit banker, even though the extension
of Q still permits an interest differential
for S&Ls. The fact that commercial
banks having portfolios with 35% in
real-estate mortgages are eligible to pay
the S&L ceiling on funds at first ap
pears to put them on relatively equal
footing, interest-rate-wise, with the
thrifts, but this is more illusion than
fact. The reserve requirements of com
mercial banks must be taken into ac
count, and they are considerably more
of a drag on the bank’s earnings than
are the equivalents of the reserves for
S&Ls.
It’s interesting that CUNA (Credit
Union National Association) has been
voicing its desire that the Federal Reg
ulator of Federal Credit Unions becom e
MID-CONTINENT BANKER for May 1, 1976
" le a n
agribusiness <
crossing the street. You’re very likely to
be loaned up seasonally if you have large agribusiness cus
tomers. That means overline financing, sometimes loan
participation. I think you get a better deal on both with a big
bank like United Missouri. Our own large correspondent
business means were not after your customers. We just want
to help you serve them better. If this makes sense to you, my
Joe Henderson. He runs United Missouri’s Agribusiness division.
MID-CONTINENT BANKER for May 1, 1976
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
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Federal Reserve Bank of St. Louis
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an “ advocate of the credit-union move
ment.” This is in opposition to the ac
cepted concept of a regulator: The
CUNA people note that the FHLBB, as
a regulator, has becom e a strong ad
vocate of the S&L movement, sharply
contrasting with the role played by the
F D IC or the Federal Reserve Board.
In fact, independent bankers have com
plained that Comptroller of the Cur
rency James Smith has becom e an ad
vocate of national banks. Since national
banks typically are larger than statechartered unit banks, the situation puts
the independent banker at more of a
disadvantage.
As a friend of independent bankers—
and one with high regard for their in
novation and ingenuity— I would like
to see them remain a healthy and re
liable force in our financial structure;
however, there are a number of adversi
ties in the short run which may prove
rather difficult for them. People in the
S&L industry tell me that thrifts offer
ing the NO W -account credit cards and
fund remissions, including point of sale
(P O S ), actually are of two classes.
One o f those classes is the S&L or
mutual savings bank that is giving away
N O W accounts. These are manned by
people who are aggressive in seeking
numbers and totals. They strongly be
lieve that, if one can obtain funds at
5/2% and lend them at 9%, such spread
management is quite profitable. That is
true, even with the softening of long
term interest rates.
Note that the spread of the cost of
funds to earnings for S&Ls has been
more attractive than that o f many com
mercial banks. This especially applies
to what should be added to the interest
rate— the effective interest rate— due to
finder’s and closing fees.
The other class of S&L executive is
more pragmatic. He has recognized
that adding the N O W service is going
to be expensive, especially as one looks
to the future o f electronic fund sys
tems. Many S&Ls are now actively uti
lizing E FT systems.
In Hawaii, an S&L, in conjunction
with a supermarket chain, is using its
debit-credit card to switch funds from
S&L accounts to the payment of charged
groceries and reversing these transac
tions by permitting S&L account hold
ers to deposit their payroll checks at
the supermarket locations, which then
are switched to the S&L.
Incidentally, the E FT movement is
acquiring some rather strange bedfel
lows. Recently, 56 Chicago-area S&Ls
applied to participate in the electronic
network of Continental Illinois Na
tional at a number of supermarket lo
cations. The independent banker, ob
serving the motivation of the S&L peo
ple to “ join” big-city banks’ E FT sys-
(Continued on page 106)
MID-CONTINENT BANKER for May 1, 1976
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From its formation in 1951 to the present,
Globe Life's success typifies the 200-year
American ideal of free enterprise, and
demonstrates that a company can become
as great as the sum total of the abilities of
its people.
Originally established to sell life and health
and accident insurance in Oklahoma, Globe
Life now is licensed in 48 states, including
Alaska and Hawaii. And, with more than a
million policy holders, one out of every
200 Americans has a Globe policy.
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MID-CONTINENT BANKER for May 1, 1976
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Financially, Globe has grown incredibly in
its quarter-century from an original $60,000
capital investment to a position of national
prominence with near $2.5 billion of life
insurance in force today. And in Oklahoma,
The Globe ranks number one, with a
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$653 = $1,000:
Bank Customer's Bequest
Earns Dividends at Store
A bequest of $653.30 to First Na
tional in St. Louis has been turned into
a gift of $1,000 in sports equipment
through the help of Casey’s Sports
stores, St. Louis.
Walter Ewing, a resident of East St.
Louis, 111., bequeathed the former
amount to First National “because em
ployees of the bank had been courteous
and helpful.” On receipt of the money,
Richard F. Ford (I.), pres, and chief op. off..
First Nat'l, St. Louis, presents $1,000 in sports
equipm ent to Fred L. Teer, adm in, asst, to
m ayor of East St. Louis, III. Bank w a s be
queathed $653.30 by resident of East St. Louis
and money w a s used to purchase equipm ent
for city. Thanks to C ase y 's Sports stores, St.
Louis, am ount purchased w a s "stretched" to
$
1, 000 .
First National officers contacted East
St. Louis officials to determine how the
money— in the form of a donation—
could best be used, and it was learned
that a variety of sports equipment was
needed for the city’s recreation pro
gram.
A list of equipment needed was pre
pared and turned over to Casey’s,
which “ stretched” the willed amount
into $1,000 worth of equipment. The
donation included a weight-lifting
bench, weight set, badminton, volley
ball and basketball nets and other
items.
Loans, Bond Purchases:
BofA Signs Contracts
To Improve Local Cities
Bank of America, San Francisco, has
signed contracts with the cities of San
Diego, Torrance and Menlo Park, all of
California, as the first participants in
its City Improvement and Restoration
Program.
16
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Community
Involvement
The program is designed to pull to
gether and coordinate the bank’s efforts
to improve the quality of the state’s
housing and older downtown commer
cial property. It provides for low-inter
est loans, bond purchases and financial
expertise.
Loans and bond purchases may be
made for rehabilitation of residences or
commercial buildings, purchases of old
er homes, construction of low-cost and
senior-citizen housing, physical im
provement of downtown areas and ac
quisitions of park and recreation facili
ties, areas a bank-sponsored study has
shown to be “problems” in California
cities.
The bank has been approving indi
vidual projects at the community level.
Each project demands a carefully tai
lored program, taking full advantage of
available state and federal assistance,
which allows the best possible terms for
the borrower.
Bank of America officials note that
cities aren’t usually in a position to act
in the capacity of lenders dispersing
federal revenue-sharing funds for hous
ing rehabilitation, so the institution has
stepped in to offer local communities
its expertise in expediting the channel
ing of these funds.
The monies are loaned, at belowmarket rates, to qualified residents
designated by a city. The program had
been proposed to more than 80 Cali
fornia cities and counties at press time.
High R o llers:
Fund Auction's Top Bidder
Takes Charity in Style
Commonwealth National, Dallas, of
fered an evening on the town in a
chauffeur-driven Rolls-Royce for the
local public TV station’s fund raising
auction and the lucky winning bidder
got more than the bank had bargained
for.
The evening on the town included
entertainment at the nightclub of the
bidder’s choice and midnight dancing.
A high bid of $205 was received, but
after the winner’s dinner at a local dis
cotheque, caviar and three wine
courses, after-dinner entertainment by
Steve Allen and Jayne Meadows at the
Fairmont Hotel’s Venetian Room and
a nightcap at that hotel’s Pyramid
Club, the bill had come to $305.
W hat was the bank’s reaction? “W e
were taken aback a little at first,” said
John Bacon, vice president, “ but w e’re
always happy to see someone get a
bargain. O f course, we feel it’s good
for the bank and community to support
public television.”
F o r the Bicentennial:
Bank's Liberty Bell Copy
Is Presented to County
Farmers Exchange Bank, Union City,
Tenn., has presented a replica of the
Liberty Bell to the people of Obion
County.
Dignitaries of Farm ers Exchange Bank and its
home tow n, Union City, Tenn., check out h a lf
size replica of Liberty Bell bank is disp layin g
in lobby during bicentennial y ea r. In 1977,
bank w ill turn bell over to O bion County Pub
lic Lib rary, w here it w ill be on disp lay per
m anently. Dignitaries are (from I.) Dan W eber,
bank pres.; M ayor Darrell G o re; George Blakemore, county school superintendent; Baxter
W heatley,
city
school
suprintendent;
Ann
Stow ers, county lib ra ria n ; and T. W illie Jones,
county judge.
The replica, which is half the origi
nal’s size, will be on display in the
bank lobby until 1977, when it will go
on permanent display in the Obion
County Public Library.
In addition, Farmers Exchange Bank
is presenting copies of the book, Cast
in America, to the library and high
schools in the county.
Gateway Nat'l Hosts Students
Lamount D avis (I.), v.p. & cash., G a te w a y
N at'l, St. Louis, conducts students from an
a re a high school on a tour of the bank. Pur
pose of the outing w a s to dem onstrate oppor
tunities, operations and qualifications needed
for a career in banking. The students visited
G a te w a y Nat'l during business hours to get a
firsthand look at its operation. The class in
structor is at right.
MID-CONTINENT BANKER for May 1, 1976
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their preference often runs to fine
silverware. Particularly to silverware
backed by the name synonymous
with quality, International Silver.
It’s just good business sense to
offer customers or prospects
the lasting beauty and en
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M o r t g a g e Lending!
Forecast for Housing, M ortgage Rates
Points to Continuation of Upturn in 7 6
HE OU TLO O K for the economy,
with emphasis on the housing in
dustry was given to participants at one
of a series of mortgage lenders’ sym
posiums sponsored by CM I Investment
Corp. recently in St. Louis.
According to CM I Chairman & CEO
Bruce Thomas, real GNP growth in
1976 will be 5.5%, unemployment will
drop to 6.5% and the inflation rate will
fall to 7%.
Savings flows will continue strong,
with 8% of disposable income being put
into savings.
Total housing starts for the year will
reach 1.7 million, compared to 1.5 mil
lion in 1975. Multi-family starts will
reach 400,000 units, compared to 260,000 last year. Single-family mortgage
rates will continue down to 8.5% from
the current 8.75%; short-term rates will
remain stable until the fourth quarter,
when they will rise; and long-term
rates will remain stable at current lev
els with some downward movement
before an upward move begins.
Mr. Thomas said that, in order to
support and sustain the recent upturn
in housing, lenders should realize that
they are no longer subject to disinter
mediation to the extent they have been
in recent years. This realization, he
said, will enable lenders to loosen the
T
purse strings and make mortgage loans
more freely than in the past.
He said lenders also should get rid
of their high-cost C D money because
too much of their money is in this cate
gory. If they can get the spread down
to 2%, interest rates on mortgage loans
can be reduced.
Another way to promote housing, he
said, would be for builders to cut down
on the cost of new houses by trimming
frills. Also those in the market for
houses should be educated to tone
down their expectations as to the “ ex
tras” needed to make a house accept
able to their standards of living.
The cost of new houses can be re
duced by offering stripped-down ver
sions, he said. Owners can always add
such things as patios and landscaping
on their own— even fireplaces and fam
ily rooms. And today’s house buyer can
be made to realize that he doesn’t have
to start with a deluxe model that is
priced beyond his means. He can buy
the basic home and add the extras as
his income permits.
Mr. Thomas called for zoning re
form, stating that such could help the
housing industry. Reducing the size of
lots would permit more and cheaper
houses to be built and reduce assess
ment costs. Improvements in municipal
government financing could take the
pressure off the real estate tax, he said,
which was originally intended to be a
tax levied according to the taxpayers’
ability to pay. He said that most gov
ernment units are slow to change and
haven’t come to grips with this issue.
Better and more economical uses of
energy can result in better-designed
homes that will be more attractive to
buyers as well as more economical to
maintain, Mr. Thomas said. This will
go hand in hand with the current
change in life style, brought about in
part by smaller families and more re
laxed living.
Reduced population growth will
force economies in housing. It also will
result in a lessening of government de
mands for capital, freeing it for hous
ing and other needs, he said.
A wave of changes has taken place
in the last five years regarding new
lending techniques to finance mort
gages, Mr. Thomas said. These include
secondary-market transactions, in which
half of the thrifts are now involved. He
said that commercial banks no longer
have to hold on to their mortgage
loans; the secondary market enables
them to sell the loans and place the
funds into short-term financing, which
is usually more to their liking.
Deferred-payment mortgages are be
coming popular, he said. They permit
lower payments during the first portion
of the loan, follow ed by higher pay
ments geared to coincide with the
homeowner’s rising income during the
balance of the loan term.
Thrifts are issuing capital notes to
supplement the savings flow, Mr.
Thomas said. And piggyback financing,
the use o f Ginny Mae, mortgage-backed
bonds and the mortgage futures market
are a few o f the innovations currently
being adopted by lenders.
Variable-rate mortgages will be slow
to catch on nationally, he said, because
of the struggle to arrive at a fair formu
la for all parties. The formulas must be
more reliable before this innovation be
comes more popular, he said. # #
A nti-R ed lining R eg u latio n s
Pro posed by Fed Board
Pictured at recent m ortgage lenders' sym posium sponsored by CMI Investm ent Corp. in St. Louis,
are CMI personnel (from I.) Dennis L. O liver, M ilw aukee, regional dir.; Robert Nevitt, Louisville,
dist. dir.; W illiam O 'Brien, Peoria, III., dist. dir.; Victor Thompson, St. Louis, dist. dir.; W illiam
K. A d air, W ichita, regional dir.; and Bruce Thom as, M adison, W is., ch. & C EO .
18
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
The Fed has proposed comprehen
sive regulations that would require fi
nancial institutions in principal metro
politan areas to disclose where they
make mortgage loans. The regulations
resulted from a law passed by Con
gress aimed at curbing redlining.
Lenders have registered strong oppo
sition to the disclosure provisions. They
say that such disclosures will be costly
and that consumers could misuse the
information.
The proposed regulation requires an-
MID-CONTINENT BANKER for May 1, 1976
Count
on the bank
that counts
with bankers.
Reliability in banking since 1883
MID-CONTINENT BANKER for May 1, 1976
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Dependability and the will to serve are the prime
ingredients of efficient correspondent banking.
Since 1883, knowledgeable bankers have looked
to the Whitney. More than 90 years of correpondent banking experience has earned for us a
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19
nual disclosure by all federally insured
or regulated financial institutions that
have offices in principal metropolitan
areas or standard metropolitan statisti
cal areas and have assets of $10 million
or more. The Fed says the regulations
will affect approximately 4,400 com
mercial banks, 3,000 S&Ls, 470 mutual
savings banks and 600 federal credit
unions.
The disclosure would have to be con
veniently available to customers at the
offices of the financial institutions.
The proposal would require lenders
to disclose loans they made on one-tofour family residences and family resi
dences of more than four units, loans
on individual units of cooperatives and
condominiums and secured and unse
cured home improvement loans.
The Fed states that nothing in the
regulations is meant to encourage un
sound lending practices or the alloca
tion of credit.
The Mortgage Disclosure Act of
1975, which triggered the Fed regula
tions, goes into effect June 28.
W hat’s a banker’s banker?
It’s a n in v e s t m e n t b a n k in g fir m th at
c a n r a is e c a p ita l th r o u g h th e s a le o f
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p riv a te p la c e m e n t. It’s a fir m th a t’s
a r r a n g e d m a n y m u n ic ip a l a n d corp ora te
u n d e r w r itin g s . It’s o n e o f th e 5 0 b e st
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20
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
PH IL A D E L P H IA — T h e
Benjamin
Franklin Hotel will host the 52nd an
nual convention o f the American Safe
Deposit Association May 19-22. Its
program features educational sessions,
workshops and panel discussions.
Knowledgeable and interesting speak
ers from the safe-deposit field will be
on hand, and entertainment and social
events along with tours to historical
spots will round out the schedule.
The program will open with a lunch
eon for association officers and execu
tive and advisory committees on May
19. A get-acquainted party is planned
for delegates and guests that evening.
Philadelphia Mayor Frank Rizzo has
been invited to welcome conventiongoers at a May 20 breakfast, while
Governor Milton Shapp will speak at
the annual business meeting. Master
o f ceremonies for the various conven
tion sessions will be Leonard E. Barnes,
retired assistant vice president, W il
mington (D el.) Trust, and former
TASDA president.
Saturday evening, M ay 22, will bring
the convention to a close with a re
ception honoring the incoming officers
and President John A. “ Andy” Robert
son o f National Bank of Greenwood,
Ind. The reception will be follow ed by
the annual banquet.
MID-CONTINENT BANKER for May 1, 1976
"T h is check has already converted
more than half o f our line check
customers to personalized checks,
and the orders are still coming ini’
H. Eugene Renno, Vice President
Georgia Railroad Bank
Augusta, Georgia
‘T h e year before last we sent m ost
of our line check users a trial order of
scenic checks, hoping to convert them
to personalized checks. The results
were good, but we still had a substantial
line check expense each month.
“ Then, last year, our Harland Sales
Representative suggested we try again,
only this time use the new Prestige
Check from Harland. W e did, and w ere
very glad we did.
“ Of the 6,000 line check users who
received the Trial Intercept Package of
Prestige Checks, more than half have
reordered the personalized checks in
stead of their usual line checks. And
the orders are still com ing in!
“ The whole program has been a
com plete success. The savings to our
bank have been significant, and our
custom ers are happy. W e’ve even had
some custom ers com e in and thank us
for sending them the Prestige Check.
“ W hat it boils down to is a simple
case o f offering the custom ers what
they want. If y ou do, they’ll gladly
buy it!’
A t Harland, we do more than print
checks. We print good ideas.
m H A R LA N D
BANK STATIONERS, PO. BOX 13085, ATLANTA, GEORGIA 30324
MID-CONTINENT BANKER for May 1, 1976
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
21
have set a goal of bringing on line one
new service a year. That’s hard. W e’ve
made it in recent years, but it is very
tough and takes a lot of work. But you
can follow the major banks by adapting,
and you ought to set some objectives
in that area.
To P ro fit or Perish Is the Q uestion
Facing the Trust Industry Today
By RAY F. MYERS
Executive Vice President
Continental Illinois National
Chicago
W O U L D BET that most of you have
more trust assets today than you
had, say, 10 years ago. I would bet you
have more accounts today than you had
10 years ago. And if you’ll think for a
minute, you’re providing services today
that weren’t even in existence 10 or 15
years ago. And yet, the fact is, today
our industry is seriously threatened be
cause we are failing to manage our
businesses in such a way that they are
profitable. And that in itself will take
us down the tubes in a very few years if
w e’re not careful.
Am I sounding the death knell of
the trust business? Not at all, though
I am trying to get you to realize how
serious the trouble is that we are facing
in the trust industry.
You say, I just can’t imagine our bank
going out of the trust business. Let me
tell you something. In the last six
months, one of the largest trust depart
ments in the country, with gross earn
ings of something over $25 million, has
launched a very serious study question
ing whether it ought to get out of the
trust business, cut out certain parts of
the trust business, spin the department
out, or find ways to turn it around so
that it is a profitable adjunct to that
bank.
I’m not presumptuous enough to tell
you how to run your organization, by
any means. I will tiy to tell you some
things that we have done in ours which
may have an application to yours, if
you’ll think about them and adapt them
a little bit.
Let me enumerate several steps to
more profitable trust departments. The
first very obvious step is that you have
to begin to plan for those profits. “ Oh,”
you say, “ I’m already planning.” Let
me give you a little test. Ask one of
your key managers, “ H ow are you com
ing on your profit plan for this year?”
If he says to you, “ What profit plan?”—
you’ve got a problem! He should have
in mind some very specific objectives in
the management of that division on
which you and he have agreed. He
should have set objectives in terms of
the gross income that he is going to
I
22
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
generate and in terms of the control of
expenses that he is going to exercise.
I took over the trust department of
our bank in 1970, and it wasn’t until
six months before I took over that I
had even seen, or that anybody other
than the head of the department had
ever seen, the figures on our organiza
tion. Now, there is no way you’re going
to get the cooperation of the fellow
down the line if he doesn’t even know
what the goal is. One of the first things
I did was to disseminate that infor
mation right through our organization
so that every division, every officer, and
quite a few o f the troops knew pre
cisely what w e were earning, knew
what our problems were, and began to
be concerned about them themselves.
Let me suggest five areas in which
you ought to set some objectives with
your key people.
The first would be profitability, and
I mean specifically a dollar amount, a
percentage increase that your manager
is expected to realize for you, stated in
terms of gross income, in terms o f net,
"In our organization . . . we have
set a goal of bringing on line one
new service a year. That's hard.
We've made it in recent years, but
it is very tough and takes a lot of
work."
etc., in each of the areas of his re
sponsibility.
Second, I think you ought to set some
objectives for innovation. N ow you say,
“ W ait a minute, w e’ve got five people
in our trust department; we can’t in
novate.” Perhaps you can’t. That may
be for the money center banks that
have lots o f money to throw into re
search. But you can imitate, you can
modify, you can adapt. I say this with
some caution, because the worst thing
you can do is decide that just because
your competitor is going down a certain
road, you ought to go down it, too. It
may be a blind alley, or it may fit his
situation much better than yours. You’ve
got to study your alternatives, make
your choice, and then adapt it to your
circumstances. At the very least, you
ought to be alert to the innovation that
is going on in the industry and get some
goals for adaptation established.
In our organization, for example, we
Third, you ought to set some ob
jectives in the service area. H ow quickly
do you respond to the letter that you
receive from your beneficiary? “ Oh,”
you say, “pretty promptly.” W ell, test
yourself. Keep a record for a week and
see whether that response goes back
tomorrow or three days from now or
a week from now or doesn’t even go
back at all. I’m sure you’ve gotten some
letters from beneficiaries who say, “ I
wrote to you four weeks ago, and no
body answered me.” Or, “ I’ve called
that officer three times, and he hasn’t
called me back.” You need to have
some clear understanding with your
people about what the level of service
is going to be and let them set some
objectives in terms of responding to
correspondence, visiting with their cus
tomers, or doing whatever their par
ticular jobs may be.
Fourth, you need some objectives
defining manpower and management
development. You need to know how
many people you’re going to have to
hire; what kinds of training programs
you’re going to put them through. Your
correspondent bank may help you with
this.
The final objective I would suggest
concerns your public responsibility, and
by that I mean setting some specific
affirmative action goals for the numbers
o f women and minority group members
who will— or should— be promoted and
hired over the course of a year.
All right— that’s the first step to
profitability— careful planning. It’s the
essential element that’s going to bring
you out of your profitability slump.
Second, you’ve got to learn to sell.
I only want to make two points. Selling
is not the job o f your trust business
development man alone. It’s your job.
You and I had a beneficiary on the
phone yesterday or sitting at our desk,
but did we ask for that savings account?
Did we attempt to change that agency
account into a living trust? D id we
attempt to move that will appointment
into a living trust appointment so that
we begin to get that income today? I
think all too often w e fail to do so.
The other thing I think you need to
be concerned about if you have people
who are doing a full-time job of busi
ness development— or even a part-time
job— is whether those people are zeroedin on the right target. You can send me
out today and I can make 10 cold calls.
On the average, I’d find four people
MID-CONTINENT BANKER for May 1, 1976
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There’s no way
in the world
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Federal Reserve Bank of St. Louis
home, and three of them would have
no interest in doing anything about
their estate plans. I might strike fire
with the next one, but it’ll be a year
from now before I’ll have that appoint
ment on the books.
Now, contrast that kind of selling
with a situation in which you send me
out to see somebody you know, who
has, say, a quarter of a million dollars—
because of ownership of a closely-held
corporation, because of money in a
savings account, or because of the
balances he keeps in his checking ac
count. OK, now w e’ve got a real target,
somebody who is worthy of the time
it’s going to take to do that job of busi
ness development.
But we’re not home yet. There is one
more step we ought to take.
There are lots of people out there
with a quarter of a million dollars who
aren’t the least bit concerned about
doing anything about their personal
affairs today. But there are some people
out there who have suddenly got stirred
up, and this is the day that you can
strike and get something done. So what
you need is a customer radar system
that’s going to identify for you these
people who have not only the means
but also the desire to do something.
The third move I would make is to
24
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
begin to take a hard look at the way
you are controlling your costs. If you
don’t know your costs by the kinds of
services offered, then that’s one of the
first things you ought to be doing.
You cut out your advertising— no
body’s going to miss it for a year any
way. You cut out your training pro
gram. You fire the newest person
around. He may be the brightest star
you have in the place, he may be the
person who is going to run that place
10 years from now, but you fire him
because he’s the newest. OK, you’ve
made your 10% cut. The heat’s off. You
wait six months, then you begin to ease
these things back in again, and your
costs are right back up.
That’s not what I mean by cost
cutting. What I mean is that you ought
to know what it’s costing you to take
care of a particular customer, not the
whole department. And the only way
you’re going to know whether Bessie,
that customer who is taking a lot of
your time, is profitable is to zero in on
her account individually.
How do you do that? The first step,
of course, is to determine what your
unit costs are in handling various phases
of your operation. It costs you so much
to buy a security, it costs you so much
to transfer a security. I would hope all
of you have established costs for your
separate operations long ago. Once you
have those, then it is easy to multiply
the 50 securities you sold in Bessie’s
account during the year times “ X ” dol
lars per security sale. N ow you have
the cost of that particular operation.
But you’ve got a very big chunk mis
sing. And that’s the amount of time an
administrative man has put into han
dling those phone calls and working on
those discretionary payments, etc.
You’re going to capture those costs
only if you ask an administrative man
to keep a time diary, just the way a
lawyer does. Now this is the most pain
ful thing you can possibly install in
your organization, but it is also the
device that is going to pay off the most
for you. Get your people to keep a
time diary, using 15-minute intervals,
to record two things— the account num
ber on which they’re working and a
number indicating the type of job
they’re doing— discretionary payments,
coi'respondence, whatever it may be.
You can rack those up at the end of
the month, quarter, year, and you’ll
know how much time each employee
has put into that account. You take the
average cost per hour for that employee
(Continued on page 106)
MID-CONTINENT BANKER for May 1, 1976
Do You W ant to Buy
Control of a Bank?
Do You W ant to Sell
Control of a Bank?
Do You W ant to Make a Start,
by Buying a Minority Interest?
If your answer to any of the
above questions is ' Yes", the
man for you to contact is
J A S O N V. OTT, President
Prescott, Wright, Snider Co.
Phone 816 842-3143
Twenty W est Ninth Building
Kansas City, Mo. 64105
Since 1885
Our firm has been in the investment banking business since 1885. W e
can also serve your needs in the fields of Listed Securities, Municipal
Bonds, Corporate Bonds, Over-The-Counter Stocks and Mutual Funds.
MID-CONTINENT BANKER for May 1, 1976
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
25
Commercial Lending
Name o f Unsung R evolutionary W a r Hero
Lives on in Robert M o rris Associates
HEN the Revolutionary W ar is
studied in schools, when it’s writ
ten about in history books or historical
novels or when it’s the subject of movies
or TV programs, who are the men most
often featured? George Washington,
Thomas Jefferson, John Adams, Ben
jamin Franklin, John Hancock, Alex
ander Hamilton and the infamous
Aaron Burr and Benedict Arnold. Sel
dom is one man even mentioned. Yet
without him, this country today might
well be a colony owned by Great Brit
ain.
W ho is this unsung hero? He’s
Robert Morris, who brilliantly financed
the war for our in
dependence from
Britain, was a sign
er of the Declara
tion of Indepen
dence and the new
nation’s first su
perintendent of fi
nance under the
Articles of Confed
eration. He helped
establish the C o
M ORRIS
lonial Navy and
later was elected senator from Pennsyl
vania.
He is best remembered, however, as
the man who secured the funds to en
able Washington to move his army from
the N ew York environs to Yorktown,
which ultimately resulted in the sur
render of Lord Cornwallis in 1781. To
finance this and earlier military opera
tions, Morris performed financial mir
acles, including advancing his own
money or that borrowed on personal
credit.
But his memory is unfairly dimmed
perhaps by historical footnotes docu
menting his postwar investment ven
tures that were instrumental in leading
him to financial ruin. Morris spent a
portion of his last days in a Philadel
phia debtors’ prison, an embittered
bankrupt. Thus, Colonial America’s
genius of public finance was denied
much of the fame and respect that
many feel should have been his.
Nevertheless, Robert Morris is not
forgotten. Today, in the most select of
banking circles, his name lives on—
bright and untarnished. Over 6,500
bank commercial loan and credit of
ficers in banks of all sizes, in every
W
26
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
state, honor the memory of the financier
through their organization, Robert Mor
ris Associates (R M A ).
Chartered in 1914, this national as
sociation, headquartered in Philadel
phia, states as its goals the “ . . . con
tinuous improvement in principles and
practices of commercial lending, loan
administration and asset management
in commercial banks.”
The national RM A membership is
divided into 30 chapters. Some cover a
major city and its surrounding areas.
Others cover an entire state, and still
others are comprised of several states.
Each chapter conducts its own busi
ness, including electing its officers and
planning its own programs and projects.
Close to 3,000 commercial loan and
credit officers in 845 banks in the states
covered by M i d - C o n t i n e n t B a n k e r
are members of eight of the associa
tion’s chapters.
Presidents of these local chapters for
1975-76 are: Lee R. Farmer, vice presi
dent, Valley National of Arizona, T uc
son— Arizona Chapter (which includes
bank members in N ew M exico); Dave
A. Makeever, vice president, Harris
Trust, Chicago— Chicago Chapter; and
James F. Nissen, executive vice presi
dent, National Bank of Commerce,
Lincoln, Neb.— Missouri Valley Chap
ter.
Also, Ronald L. Kirkpatrick, vice
president,
Lincoln
National,
Fort
Wayne, Ind.— Northern Indiana Chap
ter; Frank L. Compton, president,
Harpster
(O .)
Bank— Ohio Valley
Chapter; R. Joseph Heisler, vice presi
dent, American National, St. Louis— St.
Louis Chapter; Edward Herbert, senior
vice president, First Alabama Bank,
Montgomery— Southeastern
Chapter;
and Thomas J. Vance, vice president,
Fort W orth National— Texas Chapter.
In addition, an Indiana banker, Dan
W . Mitchell, president, Old National,
Evansville, will becom e RM A’s national
president September 1.
The national association provides its
members with an atmosphere for de
velopment and exchange of ideas and a
guiding standard of ethics in banking.
RM A offers a host of educational and
research programs geared to develop
ment of capable personnel in the com
mercial lending and credit fields. In ad
dition, through its committee system, it
provides a means for communicating
with related professions for mutual
problem solving.
Selecting Robert Morris as the name
sake for such a banking association is
not without irony. But RM A bankers
believe they could not have chosen
better.
The Morris dictum was
. . confi
dence is the source of credit and credit
is the soul of all pecuniary operations,”
a maxim any banker could support.
And though Morris may have erred
with his personal fortune, his position
in American finance was, and is, un
challenged and ranks with that of Alex
ander Hamilton. In fact, with Hamilton
and Haym Solomon, Morris organized
— in 1781— America’s first national
bank, the Bank of North America.
W hile historians and biographers still
probe the shadows of Morris’ life, they
do appear to agree on at least one
point. As Samuel Eliot Morison says in
his Oxford History of the American
People, “ Morris in finance accomplished
as much for independence as Washing
ton and Franklin did in their respective
fields.” * •
Automation and Lending
Are Topics of Workshops
Slated by RM A for 1976
PH ILAD ELPH IA — R o b e r t M o r r is
Associates’ Domestic Lending Division
has announced three new workshops
for 1976: “ Automated Loan Informa
tion Systems,” “ Secured Lending: Ac
counts
Receivable,
Inventory
and
Equipment Financing” and “ Lending
to Banks and Bank Holding Com
panies.”
Registration for the workshops is
open to personnel from non-RMA-member banks, but those from member
banks will receive preference.
The loan automation workshop has
been designed to help bankers meet
the increased reporting requirements of
the SEC and other federal regulatory
agencies. It also will help in meeting
internal needs of management for bet
ter information about the nature and
condition of the loan portfolio.
This workshop is intended for institu
tions which are considering automation
of loan information systems and those
seeking to upgrade existing systems.
Banks are encouraged to send three
persons to the workshop: the senior
loan or credit officer assigned to the
project, the bank’s note and discount of
ficer and the electronic data processing
representative who will be assigned to
the project.
The first loan automation workshop
was held March 25-26 in Chicago. The
next one is scheduled to be held May
MID-CONTINENT BANKER for May 1, 1976
YO U 'V E
HAD A ROUGH
TIME!
It’s been a rough year for
commercial lending. Many established
businesses didn’t make it through the
recession, and banks were often left
with inadequate collateral to cover
loans. Many banks brought SLT into
their problem loan situations and we
helped them control and liquidate
collateral without a loss, or at
least a minimum loss. But that
was after the fact.
Now that the economy is turning
upward, banks will be called on more
than ever to finance expansion. Your
problem of course, will be how to do
this profitably.
Try talking to your SLT
representative. We can help you put
together a collateral package based
on inventory to insure a safe loan
right from the start. We know we
can help you make new loans to
your customers and avoid the
problems of the past year. Since
we introduced our Field
Warehouse service over fifty
years ago, SLT has been helping
banks and industry work
together. If you feel that we can
help you, please let us know.
Before the fact.
SLT WAREHOUSE COMPANY
P.0. Box 242, St. Louis, Mo. 63166 • 314/241-9750 • Offices in Major Cities
N A TIO N W ID E
MID-CONTINENT BANKER for May 1, 1976
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
C O LLA T ER A L
CO N TRO L
S E R V IC E S
27
13-14 at the Hyatt Regency-Houston.
The secured lending workshop has
been developed in response to renewed
interest by banks in lending on a col
lateralized or secured basis and has
been designed to familiarize bankers
with procedures and techniques pe
culiar to this area of lending. Stouffer’s
Riverfront Inn, St. Louis, will host the
Mid-Continent-area workshop June 1718.
RM A’s third announced workshop
will cover lending to banks and bank
HCs. It has been developed to help
banks improve the analysis and man
agement of inter-bank credits, giving
special emphasis to measurement and
control of inter-bank risk and its im
plications on credit policy. The MidContinent-area workshop will be held
September 27-28 at the Hyatt Regency
O ’Hare, Chicago.
Registration materials for the work
shops have been mailed to all RM A
members. The fee is $150 to members
and $175 to nonmembers.
New International Lending Textbook
Is Released by Robert Morris
Offshore Lending by U. S. Commer
cial Banks is the title of a new book
published by Robert Morris Associates
Our Unique Family Portrait Program
can do Great Things for Ton!
For those of you who aren’t familiar with
our service, Depositor’s Portrait Service
International provides complete portrait
programs to financial institutions. The
programs are designed to improve cus
tomer relations, add new accounts, and
celebrate the opening of a new location
or the anniversary of an existing one.
They are also effective as seasonal pro
motions: summer, when the whole family
is together, or fall, so your customers
have portraits in time for the coming
holidays. For an economical fee of $250
we take professional 8x10 natural color
photographs of your customers’ families — which you can offer at no
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All you do is provide the location — we do the rest!
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NA M E AND T IT L E
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Federal Reserve Bank of St. Louis
STATE
ZIP
PHONE
(R M A ) and the Bankers’ Association
for Foreign Trade. The book is believed
to be the first contemporary text to pro
vide detailed international lending in
formation to American banks.
The book, edited by F. John Mathis,
vice president and international econo
mist, Continental Illinois National, Chi
cago, examines basic principles, op
portunities and problems in lending
abroad, from a philosophical and a
practical viewpoint.
According to the RMA, each of the
book’s 13 chapters was written by an
author with proved credentials in in
ternational commercial banking and
most are senior officers with leading
U. S. banks. An academician, an ac
countant and an attorney also penned
chapters in the work.
Chapters of Offshore Lending cover
country risk, counting practices, foreign
credit analysis, legal aspects, import
and export financing, corporate loans
to foreign branches, subsidiaries or af
filiates with parent support, lending to
foreign local companies, loans and
placements to foreign banks, financing
foreign governments and official en
tities, syndication, funding risks and
overviews of the past and future of in
ternational lending.
Price of Offshore Lending by U. S.
Commercial Banks is $16 per copy
(U. S. funds). Write: RM A National
Office,
1432 Philadelphia National
Bank Building, Philadelphia, PA 19107.
ABA's Commercial Lenders
Elect Officers for '76-'77
New leaders for the ABA’s Commercial Lending Division were elected
during the 28th annual National Credit
Conference, held in Atlanta recently.
New chairman is Harry S. Meily,
vice chairman, Security Pacific Nation
al, Los Angeles; vice chairman is Ralph
B. Gilpatrick Jr., senior vice president,
Mellon Bank, Pittsburgh.
Mid-Continent-area bankers serving
on the executive committee include
Richard F. Ford, president, First Na
tional in St. Louis; Gerald W . Fronterhouse, executive vice president, Re
public National, Dallas; Charles J.
Kane, chairman, Third National, Nash
ville; Joe Semrod, president, Liberty
National, Oklahoma City; and E. Nor
man Staub, vice chairman, Northern
Trust, Chicago.
Dan W . Mitchell, first vice president,
RMA, and president, Old National,
Evansville, Ind., will serve as an exofficio member of the executive com
mittee.
Members of the division’s 1976-77
advisory council will be Charles E.
W oodruff, vice chairman, Manufactur
ers Hanover, New York, and A. Robert
Abboud, chairman, First National,
Chicago.
MID-CONTINENT BANKER for May 1, 1976
She’s happy, she got the car with your money. You’re
happy, she’s locked in as your customer for 36 months,
and as she makes her car payments you’re cross selling her on
other bank services with the ads in her MICR-encoded coupon
payment book.
You’ll like Kansas Bank Note’s coupon payment system
too. It’s personalized with the borrower’s name, the bank
name and address, the payment number, payment amount,
account number, term of loan, net and gross payments and
dates, the total owed before and after the payment, and on
every December coupon we show the interest paid for the
year for your customer’s tax purposes.
If you can find a better MICR loan payment coupon book
at a better price, do it. But we don’t think you can. So call or
write Kansas Bank Note Company and find out.
MID-CONTINENT BANKER for May 1, 1976
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
KANSAS BANK NOTE COMPANY
FIFTH & JE F F E R S O N S T R E E T S • FTTEDONUA, KAN SAS 6 6 7 3 6 • 316-378-2146
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
“MGIC gives us more Directors’ & Officers’
liability coverage than any other insurer,
at a reasonable premium’.’
Did you analyze coverage
offered by a number of
D & O liability
companies?
‘ ‘Yes. Four besides M GIC.
And very thoroughly. We
found that types and quality
of coverage varied all over
the lot. But only M G IC
provided a complete protec
tion tailored to our bank’s
needs. And for a reasonable
cost.”
Dale L, Jernberg,
Exec.V.P. and
Director, National
Bank of Washington,
D.C. tells how MGIC
provides coverage
for directors and
officers, plus an ex
clusive combination
of key features
tailored to a bank’s
needs.
How do M GIC’s features
compare with the others?
“ Their various plans, limits
of liability, and deductibles
offer extremely attractive
options. The $5 million
policy we have with M G IC
protects all directors and
officers. In any case covered,
it pays 100% over the
deductible limits we selected.
“ Also, when we indemnify
to the extent permitted by
law, M G IC ’s coverage has
far fewer exclusions than
many other insurers. This
‘waiver o f exclusions’ is
most important to us.
They also could advance
legal fees in the event of a
costly lawsuit which is
covered. And they would
cooperate with us to counter
unfavorable publicity that
could be damaging to the
named individuals and to
our bank.”
Do you find greater
awareness of your
specific needs and
greater flexibility in
M GIC’s D & O policy?
“ Absolutely. The other
policies seemed pretty
general, and not tailored to
a bank’s needs. M GIC, on
the other hand, really
knows the financial com
munity, because they’re part
of it. This, coupled with
the fact that they did their
‘homework’ before the initial
proposal, proved the key to
our decision. M GIC
thoroughly knew what we
needed and the result is a
very secure feeling that we
have the best D & O liability
insurance we could buy.”
“ In our judgment, M G IC ’s
D & 0 liability coverage is
by far the best value we
could buy. Other companies
just couldn’t provide us the
kind of protection that
M GIC offers.”
How do you feel about
your right to participate
in selection of counsel in
the event of a lawsuit?
“ It is very important.
M GIC would give us a free
hand to choose counsel,
subject to their approval.
MID-CONTINENT BANKER for May 1, 1976
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
MGIC
Totally tailored
D & O liability protection.
And we mean total.
MGIC Indemnity Corporation
A Subsidiary of MGIC Investment Corp.
MGIC Plaza, Milwaukee, Wl 53201
31
Agricultural N e w s
Financing Available for Young Farmers
W ith M anagem ent A b ility , Good Cash Flow
OUNG farmers who have manage
ment ability and can produce a
healthy cash flow will receive the fi
nancing they need to enter farming, a
group of agri-bankers said recently at
a meeting sponsored by ABA’s Agri
cultural Bankers Division.
Marlin D. Jackson, chairman and
president, Security Bank, Paragonici,
Ark., said bankers use the following
techniques to find and work with like
ly young farmers :
• Identifying those people with the
abiding, sincere desire to becom e
farmers. It is much easier to work with
the sons and daughters of successful
farmers, he said, than with young peo
ple who have little real farming expe
rience.
• Identifying those with the man
agement ability and the willingness to
endure the many hours of arduous la
bor connected with farming.
• Counseling with young farmers
and assisting them in locating farming
opportunities. “ W e consider ourselves
active partners,” he said, “ all the way
down to family financial planning.”
Mr. Jackson said a usual progression
for young people entering farming in
cludes first obtaining their own equip
ment, then leasing land from their par
ents or others, building a healthy cash
flow and, finally, acquiring their own
land.
To evaluate farm credit applications,
the bankers said they use as many of
the following tools as possible: past,
present and projected financial state
ments; comparative analysis of past
years’ operations; cash-flow statements
(often using the 1040F federal tax
form ); profit-and-loss statements; farm
visitations; analysis of the farmer’s
bookkeeping system; and a complete
chronological history of the individual’s
farming activity.
“ There is no question of our eom-
Y
mitment to finance the young farmer—
the question is which one and how,”
Robert L. Walton, president, Farmers
& Merchants State, Bushnell, III., point
ed out.
“ Does the young farmer have the
ability to do the job, given the other
necessary inputs? If, as bankers, we
can answer this question ‘yes,’ then it
is up to us to find some way, not only
to help him get started, but also to
keep him going and growing in his
farming venture, as his success is the
key to the future of agriculture.”
W endel D. Wilier, vice president,
Decorah (la .) State, said that, with
the amount o f capital required today,
it helps if a young farmer has a father
or other relative who can assist him fi
nancially.
Otherwise, “ we try and work with the
proposed customer through the Farm
ers Home Administration (F m H A ),”
using that agency’s direct operating
loan program and its guaranteed loan
program. Under certain arrangements
with FmHA, “ payback by the young
farmer is minimal during the first two
years, giving him an opportunity to
build his cash flow.”
The bankers urged that both young
and well-established farmers take active
steps to control their risks, including:
• Purchasing life insurance (at least
enough to cover real estate debt) and
casualty insurance.
• Using forward contracting on a
regular basis to at least cover basic op
erating costs. Hedging, they said,
should perhaps be used only by more
sophisticated farm operators.
• Planning to minimize estate taxes,
which can destroy a farm family’s fi
nancial health, through trusts, family
corporations or other arrangements.
• Using realistic cash and operating
plans to allow for occasional and in
evitable reverses which are beyond the
Farm b a n k e rs look at a y o u n g fa rm e r's m a n a g e m e n t
a b ility f financial re sp o n sib ility , p u rp o s e in se e k in g credit,
ability to r e p a y a nd collateral. "It all boils d o w n to m a n
a g e m e n t a nd cash flo w ."
32
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Federal Reserve Bank of St. Louis
farmer’s control, such as declines in
market prices, sharp increases in input
costs, bad weather or outright crop
failure.
Revision of federal tax laws to cut
the impact of estate taxes on farm fam
ilies was unanimously urged by the
bankers. “ Just within the past two
weeks w e had to loan a young fellow
$94,000 to pay off his estate taxes and
keep him in business,” said one of the
bankers. “ And that’s not unusual, I’m
son y to say.”
Farm bankers today look at a young
farmer’s management ability, financial
responsibility, purpose in seeking credit,
ability to repay and collateral, said
C. P. Moore, president, Northwestern
National, Sioux Falls, S. D. “ It all boils
down to management and cash flow,”
he said.
“ Young farmers know they have to
start out with some kind of a base, and
many will use various means to acquire'
this base, including renting land, using
machinery in exchange for labor, wife
working at an outside job, starting a
small labor-intensive hog farrowing op
eration, taking a winter job or growing
light calves.
“ For this kind of operator, oppor
tunities will present themselves along
the way.” • •
Postal Interruptions: ABA
Offers Contingency Guide
W A SH IN G TO N , D. C.— Guidelines
for banks reviewing or developing con
tingency plans for handling postal in
terruptions have been made available
by the American Bankers Association.
“ A Contingency Plan in the Event
of an Interruption in Postal Service”
is an eight-page booklet that expands
on a checklist of items developed in
late-spring 1975 when contract negotia
tions between postal workers and the
U. S. Postal Service threatened an in
terruption. The checklist was devel
oped by the ABA’s Operations and
Automation Division and the Postal
Service Task Force, in cooperation with
the Federal Reserve System.
As the booklet points out, “ In the re
mote possibility of a postal service in
terruption, contingency planning for
mail-service alternatives would be fa
cilitated by two important considera
tions: an understanding of the postal
regulations and the legal and technical
terms employed in the regulations; and
a checklist providing items the bank
should consider before initiating con
tingency plans for the delivery of mail
and other materials.”
“ A Contingency Plan in the Event
of an Interruption in Postal Service”
may be obtained for $5 from the ABA
Order Processing Department, 1120
Connecticut Avenue, N. W ., Washing
ton, DC 20036.
MID-CONTINENT BANKER for May 1, 1976
How our bank can help your bank
grow with your farm ers and ranchers.
The world’s appetite for food and fiber is getting bigger
all the time. So today’s demands for agricultural financing
may be more than you can handle with available funds.
First National Bank in St. Louis is ready to help
you and your customers.
With funds for operating and production loans,
machinery and equipment loans. With leasing
plans and exporting assistance.
Even investment and estate planning
to help them conserve their assets.
You’ll find us easy to work with, and
we’re staffed to respond quickly. Our
Agricultural Department is headed by
Neil Bergenthal, Vice-President, who
has 20 years of farm credit experience
in agribusiness and the U.S. Farm
Credit Administration.
Call Neil at (314) 342-6695. And
send for our new brochure, “The
Changed Nature of Agricultural
Financing.”
And grow with your farmers
and ranchers.
F irst National B ank
in S t.Member
Louis
Wfc
FDIC
I fli
510 Locust, St. Louis, Mo. 63101
MID-CONTINENT BANKER for May 1, 1976
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
33
BANKING W O R LD
F. Bodine, president, First Pennsyl
vania Banking & Trust, Philadelphia;
M. Brock Weir, president, Cleveland
Trust; and George H. Dixon, chairman
and president, First National, Minne
apolis. Herbert V. Prochnow, president
(retired), First National, Chicago, has
been reelected secretary, while William
J. Korsvik, First National of Chicago
vice president, has been reelected as
sociate secretary.
JA Y
DALY
TULLOS
• Peter Jay, vice president, inter
national department, First National,
Fort Worth, has accepted the invita
tion of U. S. Commerce Secretary Elliot
Richardson to join the District Export
Council. The councils were established
nationwide to serve as part of the joint
govemment/industry export expansion
endeavor. Prior to joining First Nation
al in 1973, Mr. Jay was area executive
for Latin America at Indiana National,
Indianapolis.
• Hugh C. Daly, vice chairman,
American Natural Gas Co., has been
elected a director of Detroitbank Corp.
and its principal subsidiary, Detroit
Bank. He joined American Natural Gas
in 1950 and advanced to vice chairman
last year.
• John B. Tullos, executive vice
president and cashier, First National,
Jackson, Miss., has been named a mem
ber o f the Alabama-Mississippi District
m ay
Export Council by Commerce Secre
tary Rogers Morton. The district coun
cils serve the President’s Export Coun
cil and the President’s Interagency
Committee on Export Expansion, pro
viding advice on expansion of export
trade and policies affecting U. S. export
performance.
• William S. M ay will be elevated
from vice president and secretary of
the Federal Land Bank, Wichita, to
president, following the retirement June
30 o f G. A. “ Bud” Wiles. Mr. May has
been with the Land Bank System since
1941.
• Ellmore C. Patterson, chairman,
Morgan Guaranty Trust, New York
City, has been elected president of the
Federal Advisory Council of the Fed
eral Reserve System. William F. Mur
ray, chairman, Harris Trust, Chicago,
has been named vice president of the
council. Elected as directors were James
THREE PUBLICATIONS O F THE FO U N D A TIO N
O F THE SOU TH W ESTERN GRADUATE SCH OO L
O F BANKING
The Bank Director
Reprinted in paperback............................................................. $ 8.95
Advanced Bank Holding Company Management Problems
In paperback................................................................................... $12.50
The Bank Holding Company
Hardback ........................................................................................ $17.50
Order from
SMU Press, Science Information Center, Dallas, Texas 75275
The Foundation of the Southwestern Graduate School of
Banking, SMU Box 1319, Dallas, Texas 75275
34
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
• Peter O ’Malley, president, Los An
geles Dodgers, Inc., has been named
a director of Bank o f America, San
Francisco. Mr. O’Malley formerly was
an advisory director.
• Samuel B. Stare, senior vice presi
dent, Union Bank, Los Angeles, has
been elected chairman o f the American
Bankers Association’s Bank Investments
Division. He succeeds D. Dean Kaylor,
senior vice president, National Bank of
Detroit, and will serve a one-year term.
Perry B. Wydman, president, Third
National, Dayton, O., has been named
division vice chairman, while one MidContinent-area banker, William T.
Springer, senior vice president, Boat
men’s National, St. Louis, has been
elected to serve as a division member.
Marvin Holderness Jr. Dies
OF IMPORTANCE TO BANK DIRECTORS AND
EXECUTIVES AND ATTORNEYS SERVING BANKS
or from
• Charles L. Tull, vice president of
planning at First National, Little Rock,
has been named to the faculty of the
Stonier Graduate School of Banking,
Rutgers University, New Brunswick,
N. J. Mr. Tull joined First National in
1969 as a systems analyst in the data
processing division. He formed the
bank’s planning department in 1972
and was elevated to vice president two
years later.
NEW YORK CITY— Marvin E.
Holderness Jr., 54, senior vice pres
ident and a director of the adver
tising agency, Doremus & Co., died
April 11 after a long illness. Mr.
Holderness headed the agency’s
bank marketing/advertising group,
which served major commercial and
savings bank clients.
Mr. Holderness was born and be
gan his advertising career in St.
Louis, where his father was a lead
ing banker. The younger Mr.
Holderness joined Doremus in New
York City in 1949, became a vice
president in 1955, a director in 1970
and a senior vice president in 1972.
MID-CONTINENT BANKER for May 1, 1976
GAN YOUR TRUST OPERATION
AFFORD SURCHARGE
LIABILITY LITIGATION?
Every bank with trust operations is ex
posed to litigation. Increasingly, the bene
ficiaries of trusts are challenging invest
ment decisions and account servicing by
trust departments.
The concept of the “ prudent man” rule
in trust handling is changing. It is now felt
that bank trust departments will probably
be reguired to exercise a higher degree of
care beyond that of the ordinary “ prudent
man” . And. with the passage of the
Employee Retirement Income Security Act
of 1974 (ERISA), fiduciaries of pension
plans,, as well as personal trusts, have
been exposed to new interpretations of the
“ prudent man” rule. The Federal standards
set by ERISA define rules and conduct, but
interpretations of the law will be made by
the courts.
WHAT SCARBOROUGH
CAN HELPTO DO
ABOUT IT ...
The litigation of cases involved with trust
handling can be expensive, even without a
judgment. The answer is protection pro
vided by Trust Operations Surcharge
Liability Insurance through Scarborough.
Now, this Scarborough designed policy
has a specific endorsement to cover your
trust department in the event of litigation
resulting from the new ERISA Act.
Defense costs, judgments, expenses,
and out of court settlements (with
Company’s consent) resulting from suits
are reimbursed, excess of a deductible.
Coverage is provided on a discovery basis.
Since Surcharge Liability Insurance
covers your bank as a corporate entity,
(unlike Directors/Officers Liability), pro
tection is provided for the bank’s capital
structure from erosion, or worse, in the
event of a substantial payout from litiga
tion. Today, self-insurance is a thing of
the past.
For more information—write or call collect
to Bob Marshman or Dick Morran.
T ru st
O p e r a t io n s
S u rch a rg e
L ia b ilit y
In s u r a n c e
Scarborough
bank insurance
■me*■«
S c a rb o ro u g h
the bank insurance
people
Scarborough & Company, 222 N. Dearborn St., Chicago, Illinois 60601
MID-CONTINENT BANKER for May 1, 1976
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Phone(312)346-6060
35
N E W S ROUNDUP
News From Around the Nation
Exception-Item Problem Spotlighted
A solution to the exception-item problem was sought
last month at a meeting of the Joint Exception-Item Task
Force. This group is made up of representatives of the
ABA, Bank Administration Institute and the Fed. As bank
ers know from painful experience, an “ exception item” is
a check that cannot be processed through the normal
processing stream for various reasons and, consequently,
requires additional handling.
The task force, at its two-day meeting, focused on three
functional areas— return items, rejects and adjustments—
and tried to analyze proposals in each area.
The task force will be in existence for a year.
IRS Summons Authority Opposed
The ABA has announced support for measures that
would limit the Internal Revenue Service’s authority to
issue administrative summonses for taxpayers’ records.
In testimony before the Senate Finance Committee, where
the House-passed tax bill now is being considered, William
M. Horne Jr., chairman, ABA Taxation Committee, said the
IRS should be required to notify a taxpayer o f a pending
summons for his financial records. He added that the tax
payer should be allowed to object to the summons and to
stay compliance before any records are turned over. Mr.
Horne is senior vice president and general tax counsel,
Citibank, New York City.
The ABA urged tax-reform provisions that would give
the taxpayer 14 days to notify the record holder and the
IRS to not comply with the summons.
The ABA also supported tax-reform provisions that
would limit issuance of “ John D oe” or “ no-name” admin
istrative summonses for taxpayers’ financial records to pro
tect the rights to financial privacy of individuals not under
tax investigation.
No More Bootstrapping'
A new Fed ruling, which goes into effect May 15, re
quires bank HCs to notify the Fed 45 days before pur
chasing their own stock.
The Fed said the requirement will help it supervise
bank HCs “by providing advance notice of redemptions of
bank HC stock that could have a significant impact on the
company’s capital structure.”
According to the Fed, the new rule is intended particu
larly to discourage the “bootstrapping” practice, by which
a holding company incurs substantial debts to buy or
36
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
redeem its own stock outstanding, generally to help a
shareholder or shareholder group gain control of the HC.
When the stock purchase would appear to create “ an
unsafe or unsound condition in a holding company,” the
Fed said, the Federal Reserve Board would use its powers
to prevent the transaction.
M oney-Order Sales for HCs?
The Fed invited comment by April 30 on proposals to
add a new nonbank activity to the list of those allowed
bank HCs.
The proposals— to sell money orders or money-order-like
instruments of various denominations— were made in con
nection with applications by bank HCs to engage in this
activity.
The Fed also invited comment by April 30 on whether
the applications to engage in the new activity can be ex
pected to produce public benefits that outweigh any ad
verse consequences.
More Bank Trust Funds Disclosure?
The Securities & Exchange Commission may ask federal
bank regulators to require broader disclosure by bank trust
funds. This possibility was indicated in a Wall Street
Journal interview last month with SEC Chairman Roderick
Hills.
The SEC’s Division of Investment Management Regula
tion is making a sweeping study that, according to the
division’s new director, Anne P. Jones, will examine all
types of indirect investments. This study includes mutual
funds and bank trust funds and all situations where pro
fessionals manage other people’s money. According to Mr.
Hills, one thing the study will do is compare the regulation
of mutual funds with that of bank trust funds. Among
other things, he says, the SEC wants to determine “ what
kind of regulatory disadvantages” mutual funds operate
under.
The SEC doesn’t have any jurisdiction over bank trust
funds, except indirectly through disclosure requirements it
imposes on bank HCs. Mr. Hills says he doesn’t think his
agency would want direct authority over bank trust funds.
As he puts it, “ Our aim isn’t so much to regulate (bank
trust funds) more, but to see what regulations mutual
funds have that are anti-competitive.”
The SEC will consider, according to the Journal, wheth
er additional protection is needed for investors whose
money is held by bank trust funds. The newspaper quoted
Mr. Hills as saying that he hoped any changes the SEC
might recommend for bank trust funds would be achieved
in cooperation with federal bank regulatory agencies with
out requiring new legislation.
MID-CONTINENT BANKER for May 1, 1976
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Congress To Hear Testimony
On Condition O f Big Banks
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Do W e Need Better Bank Supervision?
O W E NEED better bank supervi
sion?
In the wake of recent congressional
inquiries and newspaper articles, this
question has demanded increasing pub
lic attention. People are asking whether
a strengthened regulatory system would
lead to a more stable banking industry
and to fewer bank failures.
In this atmosphere, it is important
for bankers and the public to examine
the facts, to see how stable the pres
ent banking system is, and to deter
mine whether greater supervisory au
thority is in order.
The first fact we must acknowledge
is that this nation is just beginning to
emerge from the worst recession since
the 1930s. Production declined and un
employment rose dramatically. At the
same time, we experienced double-digit
inflation. Never before in our history
had we been buffeted by the dual
problems of high inflation and high un
employment. Economists, politicians,
the general public and bankers sought
answers to the question: H ow can the
nation reduce unemployment without
fanning the flames of inflation?
As a result of the poor economic pic
ture, some businesses and individuals
found it difficult to repay loans— loans
owed to banks. W hen the economy
goes sour, businesses and individuals
are hurt, and banking is no exception.
Yet, during these past few troubled
years, bank services were needed more
than ever to help the struggling econ
omy. Businesses that could not obtain
money in the money market turned to
D
38
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
By J. REX DUWE
President
American Bankers Association
banks for loans. Banks had a choice:
They could retrench, refusing to make
loans to companies unless they had
the best credit ratings. Or banks could
affirm their confidence in the econom
ic system and grant these loans. To
retrench would have meant that the
recession would have been longer and
deeper. In fact, had banks refused to
grant loans, I doubt that we would pres
ently be emerging from the recession.
As a result of these policies and as a
result of the overall economic picture,
banks suffered greater loan losses than
they had in previous years. More spe
cifically, in 1975, net loan losses after
recoveries were about $3.3 billion, com
pared with $2 billion in 1974. But
does this reflect a danger to the bank
ing system?
I think not. The 1975 figure should
be seen in the light of total bank loans,
profits, loan-loss reserves and capital.
Yes, the banking industry had loan
losses of $3.3 billion. But total bank
loans (not counting Fed funds) were
roughly $505 billion at the end of the
year. In other words, loan losses were
6 5 /1 0 0 of 1% of total loans.
More importantly, most banks were
Mr. Duwe is chairman and president,
Farmers State, Lucas, Kan.
able to cover their loan losses with
their current earnings. Earnings for
banks in 1975 are estimated at $7/4 bil
lion.
When banks cannot cover their loan
losses with current earnings, they turn
to their next line of defense, loan-loss
reserves. At year-end 1975, loan-loss
reserves totaled about $8.64 billion, an
increase of $260 million over year-end
1974.
A further cushion against loan loss
hazards is bank capital. Figures for
1975 show that bank equity capital
had grown to $64 billion.
These figures clearly indicate that
the banking industry as a whole is well
protected against losses that would do
permanent damage to its stability.
But aggregate figures don’t show in
dividual bank weaknesses. The fact of
the matter is that some banks do have
problems and some banks do fail. H ow
ever, it’s important to place failures in
perspective.
In 1975, a difficult year for all busi
nesses, 13 federally insured banks
failed out of a total of more than 14,000 nationwide. But even in these
failures there was no cause for alarm.
Depositors were insured for up to $40,000. But it is rare for depositors in a
failed bank to lose any money, even if
their deposits exceed the insured
amount. In most cases, the failed bank
is merged with a healthy one and all
deposits are effectively safeguarded.
FD IC insurance is backed by a $6.7
billion fund, and this fund is growing
every day. It is comprised of insurance
MID-CONTINENT BANKER for May 1, 1976
assessments paid by individual banks
and interest earned by the fund. It is
out of this fund that losses and ex
penses are paid. In 1975 alone, $410
million in interest was earned on the
fund. This interest is more than enough
to cover the total losses of all FD IC insured banks that failed from the day
the F D IC was established through
1975.
N ow let’s look at the 13 federally in
sured banks that failed in 1975. If past
experience on the percentage of dis
bursements recovered by the F D IC is
applied to outlays for these banks, the
net loss will be about $50 million in in
surance funds, even though the total
deposits of these banks was $343 mil
lion. In other words, the F D IC doesn’t
just accept the liability for insured de
posits; when a bank fails, the bank still
has assets and the FD IC seeks to make
the most of these assets and thereby
cut losses.
In sum, the evidence clearly shows
that the nation’s banking system is in
good shape. But that doesn’t mean that
there is no need for change in the su
pervisory' authority of banking agen
cies. In fact, the ABA has testified in
favor of strengthening federal bank su
pervisory authority.
The federal bank regulatory agencies
have encountered serious practical dif
ficulties in discharging their responsi
bilities to protect depositors and ensure
a sound banking system. The agencies
lack effective sanctions against individ
ual violators of banking laws and regu
lations. Short of the drastic remedies
of removing a bank officer or taking
criminal action, bank regulators have
few options. For this reason, civil pen
alties are needed.
What actions can presently be taken
by regulators when banks violate laws
or regulations? The agencies can issue
cease-and-desist orders in these situa
tions or when a bank’s actions are en
dangering deposits. But the regulators
do not have the authority to punish
past conduct.
For example, if a regulatory agency
found that a bank had been violating
Regulation Q, dealing with restrictions
on interest rates, the regulator could is
sue a cease-and-desist order that would
stop the practice. But what could it do
either to deter other potential violators
or to punish the bank? Nothing. The
regulatory agencies need to have an en
forcement mechanism that can be ad
ministered selectively and in appropri
ate gradations so that improper con
duct can be punished. They need more
than cease-and-desist powers.
Federal bank regulators also need
more leeway to remove a bank officer
or director. Under current law (Finan-
PPEARING at the ABA’s National Credit Conference in Atlanta in March
- were ABA President J. Rex Du we (r .), president & chairman, Farmers State,
Lucas, Kan., and Charles E. W oodruff, chairman, ABA Commercial Lending
Division, and vice chairman, Manufacturers Hanover, New York.
Keynoter Duwe spoke on disclosure, which, he said, was not a dirty word. He
said that bankers, in dealing with the demands for greater disclosure, cannot
ignore the public interest factors of privacy, the effect disclosure might have on
a bank’s willingness to make loans that involve a degree of risk and the cost of
increased disclosure. He said the three factors must be weighed against the poten
tial benefit to be gained from more widespread dissemination of facts about bank
operations and performance. He said, that, although the public could benefit from
increased disclosure, bankers should not delude themselves that simple disclosure
will provide the solution to the crisis of confidence facing America’s financial
institutions.
Mr. W oodruff, in welcoming remarks, cautioned against overreaction on the
part of the press, the public, regulators and even bankers to the "crisis-ofconfidence” situation facing the industry.
He said that, although bankers’ objective must be to achieve better return on
assets, they should not revert to such shortsighted tactics as rate-cutting and
reaching for questionable business. He said profitability must become much more
than a byword. Bankers must develop more sophisticated management informa
tion systems with which to measure credit risks and to insure adequate rates of
return.
He stated his concern that regulators will overreact to critics in the Congress
and the press with overly severe regulation that could inhibit banks from perform
ing their lending function. He said that banks have a job to do and they must do
it, regardless of the level of loan losses, classified loans or the heat of criticism in
and out of Congress. * *
A
Also In This Issue
C o m p tro ller's Office D evelop s S u rv e illa n ce Sys
tem to Fight P ro b lem -B an k S i t u a t i o n .....................
P ag e 41
'O ld -Tim er' B a n k e rs Com m ent on R easo n s Behind
R ecent B an kin g P r o b l e m s ............................................ P a g e 42
B a n k e rs From La rg e , Sm all Institutions Discuss
Loan P o rtfo lio A d m in is t r a t io n ............................. P ag e s 44-58
State BA P re sid e n ts A ssess S i t u a t i o n .....................
P ag e 60
State R eg u la to rs G iv e Loan-Loss V i e w s ..................
P ag e 64
W atch th e M a y 15 Issu e fo r M o re on This Topic!
(Continued on next page)
MID-CONTINENT BANKER for May I , 1976
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Federal Reserve Bank of St. Louis
39
tors need additional powers to regulate
banks?
I believe the answer is yes, but due
process of law must be protected.
Regulators need added powers to regu
late banks, not because banks are un
stable, but because regulators have
lacked alternatives for taking effective
action against the small number of
banks that are abusing their powers. * *
Do W e Need Better Bank Supervision?
" I b e lie v e the a n sw e r is y e s , but d u e p ro ce ss of
la w m ust b e p ro te cte d . R eg u la to rs n eed a d d e d
p o w e rs to re g u la te b a n k s, not b e ca u se b a n k s a re
u n sta b le, but b eca u se re g u la to rs h a v e la ck e d a l
te rn a tiv e s fo r ta k in g effectiv e action a g a in st th e
sm a ll n u m b er of b a n k s th a t a re a b u sin g th eir
p o w e rs ."
Take Banking's Case to Public,
cial Institutions Supervisory A ct), reg
ulatory agencies can remove a bank of
ficer only if they find him or her guilty
of “ personal dishonesty.” An individual
who has been grossly negligent in the
management of a bank, but not per
sonally dishonest, cannot be removed.
In such a situation, regulators are faced
with a difficult choice: They can con
tinue to attempt to persuade the officer
to change his or her course of action
or they can terminate the bank’s insur
ance.
On March 26, the ABA testified b e
fore the Senate Committee on Banking,
Housing and Urban Affairs in favor of
S. 2304, with certain amendments. The
bill was designed to provide federal
bank regulatory agencies with more ef
fective enforcement tools. It would
establish civil penalties for the violation
of certain existing banking laws; clarify
the authority of the banking agencies
to institute cease-and-desist proceed
ings against individuals; and provide
more practical standards for officer and
director removal.
In addition, the bill would strength
en Fed supervision o f bank holding
companies by giving the Board of G ov
ernors authority to order an HC to ter
minate activities or to divest a sub
sidiary which threatens the safety or
soundness of a bank which also is a
subsidiary of the same HC. The bill al
so seeks to reduce the concentration
of risk in a bank’s loan portfolio caused
by excessive loans to bank insiders.
Although the ABA supports the gen
eral goals of the bill, we believe certain
amendments are necessary. The ABA’s
suggested amendments would ensure
due process in the assessment of civil
penalties; provide the Fed with needed
flexibility in divesting a bank HC of a
subsidiary; and help assure that com
munities and their banks are not hurt
by laws designed to prevent abusive
insider dealings.
This last point is quite important. Al
though ABA supports efforts to curb
abusive self-dealing, provisions in the
proposed law could affect legitimate
practices and be counterproductive.
The proposed bill would amend the
Federal Reserve and Federal Deposit
40
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Federal Reserve Bank of St. Louis
Insurance Acts to require that loans by
a bank officer or director or to an in
dividual owning more than 5% of the
bank’s voting securities must be aggre
gated with loans to companies con
trolled by that officer, director, or share
holder so that the bank’s lending limit
can be applied. This provision could
hurt communities where banks depend
on the managerial talent of directors
whose businesses may also be prime
bank customers.
Outside directors are common on
bank boards throughout the nation and
provide banks with sources of financial
expertise in situations where alternate
management talent may not exist. Some
communities and their banks cannot
afford to lose this management talent.
Therefore, S. 2304 should contain au
thority for exemption of these commu
nities and their banks. The ABA also be
lieves the 5% standard is unrealistically
low and, in absence of other factors,
doesn’t indicate either control or an in
sider position. The association has said
that a requirement of loan aggregation
in the case of individuals owning or
controlling 10% of a bank’s voting se
curities would be much more realistic.
W e have suggested that the proposed
law be amended in this manner.
Legislation to strengthen the regula
tory powers of supervisory agencies is
needed, not because the banking indus
try is unstable, but because the fed
eral agencies lack the tools with which
to compel a small number of banks that
are operating outside the realm o f ac
ceptable bank practice to behave re
sponsibly.
Such legislation would not end bank
problems. As long as we have 14,000
banks making independent decisions,
w e are going to find that some of these
banks make decisions that prove to be
wrong. As Bobert C. Holland, a mem
ber of the Board of Governors of the
Federal Reserve, has said, “ It is hu
manly impossible— and even undesir
able— for supervisors to prevent all
bank problems; but it is practical to
aspire, as we do, to recognizing prob
lems early and moving promptly to try
to remedy them.”
So, I ask once more, do bank regula
Urges Chemical Vice Chairman
The vice chairman of Chemical Bank,
New York City, recently urged bankers
to be more aggressive in fostering a
general enlightment about the banking
industry.
“ W e cannot depend on the media to
educate the public about issues involv
ing banking,” said Richard K. LeBlond.
“ The complex subjects cannot be prop
erly treated in a few paragraphs.
“The banking industry is a great deal
stronger and more stable than the pub
lic and some legislators might believe,”
Mr. LeBlond said. “ In highlighting the
occasional weakness o f our system, the
media seems to have obscured bank
ing’s virtues and vitality, and it’s time
to put things into perspective.”
He urged bankers to carry “ our case”
directly to the public and said the place
to begin is with their friends and neigh
bors. “ Just as elections are won in the
precincts, public attitudes are shaped
in local communities. It is here,” he
emphasized, “ where we are known per
sonally and respected individually that
we can gain a fair hearing from our
fellow citizens.”
Mr. LeBlond pointed out that the
number of “ so-called bank failures”
since the early 1930s averages about
10 each year, compared with more than
600 a year in the 1920s. “ The term
‘failure’ can be misleading,” he said.
"Am ong the banks that went out of
business, the larger ones were success
fully merged with other institutions or
were able to resume viable operations
later.”
He pointed out that the F D IC has
sustained insurance losses of only some
$125 million over its entire history out
of a total insurance fund exceeding
$5.25 billion. “ The fund is better than
99% intact. It’s hardly a record that
should make us blush or cause others to
lose confidence.”
The biggest challenge the banking
industry faces today, according to Mr.
LeBlond, is how to communicate the
truth about banking to the American
people “ because misunderstanding can
easily lead to unwarranted legislation,
regulation that would hamper the in
dustry and ultimately hurt the public.”
MID-CONTINENT BANKER for May 1, 1976
Bank Surveillance System Developed
To Fight Problem-Bank Situation
nswering the question “what
can be done to prevent more
banks from becom ing problem banks?”
was a basic objective of a recent in
dependent study of the Comptroller of
the Currency. That study covered num
erous aspects of the Comptroller’s of
fice and one of the principal recom
mendations of the study pertaining to
that question was the establishment of
a National Bank Surveillance System
(N BSS). The process of implementing
the study’s recommendations began in
September, 1975, and the Comptroller’s
office is making good progress in the
development stage of the NBSS.
The NBSS is an early warning sys
tem that is designed to effect timely
and appropriate decisions by bankers,
by examiners and by the various super
visory and enforcement sections of the
Comptroller’s office. The NBSS con
sists of four basic elements: (1 ) a data
collection system, (2 ) a computerbased monitoring system that can de
tect unusual or significant changes in
circumstances within a bank and with
in the national banking system, (3 ) an
evaluation of that data by experienced
personnel and (4 ) a review procedure
that would provide administrative con
trol over all proposed remedial actions.
The basic information in the NBSS
data base is derived from the official
reports of condition and income that
are submitted to this office on a quar
terly basis. These reports, beginning
with the March 31, 1976, reporting
date, have been revised to make them
more meaningful for supervisory pur
poses. For example, all banks have
been divided into two groups: Banks
with resources of $300 million or more
are required to file supplemental re
ports and to report the details of their
income and expense quarterly on a
fully consolidated, foreign and do
mestic basis; smaller banks will file
detailed reports of condition on a quar-
A
By JA M ES E. SMITH
Com ptroller of the Currency
W ashington, D. C.
terly basis and detailed income and ex
pense reports on a semi-annual basis.
Instead of the five- to six-month pe
riod traditionally required to assemble
this data through a three-agency pro
cess, this office now collects, edits and
enters this data in a computer in a
fraction of that time. Other informa
tion from reports of examination and
from special reports also is entered, and
the computer produces a multi-page
five-year analysis of each national bank.
This computerized analysis also is
prepared for peer groups of banks for
comparative purposes and for the pur
pose of analyzing the national banking
system. The NBSS is flexible in deal
ing with peer groups. For example, if
we are analyzing a bank which has
branches and which has resources of
$350 million, we could compare it with
a peer group consisting of other branch
banks having resources ranging from
$100 million to $500 million. If the
bank has been a seller of fed funds,
we could compare it with a peer group
of other banks which have been sellers
of fed funds.
National bank examiners already
have demonstrated their professional
ability as analyzers of the financial con
MID-CONTINENT BANKER for May 1, 1976
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Federal Reserve Bank of St. Louis
dition of a wide range of borrowers
from national banks. W e will use the
professional analytical ability of nation
al bank examiners, who have been
trained as NBSS specialists, to analyze
the financial condition of the national
banks. These specially trained exam
iners will use the data produced by the
computer to assess a national bank’s
financial condition just as they would
analyze a borrower’s financial reports
in a bank’s credit file.
Their findings, summarized in a
brief memorandum and including a
series of relevant questions requiring
further investigation, will be forwarded
to each regional office. This data will
be reviewed and analyzed on a quarter
ly basis, and every national bank exam
iner will receive one or more of the
computer-produced reports for each na
tional bank he is assigned to examine.
Our initial review of these computerproduced reports, as analyzed by
trained specialists, suggests that in
many instances loan problems, liquidity
problems, earning problems, and capi
tal problems can be detected years in
advance of their occurrence. Thus,
early supervisory action can be taken
in time to avoid permanent impairment
of a bank’s soundness.
Bank failures generally result from
decisions made by bankers. W hile the
NBSS cannot detect or prevent fraud
or thefts, it will detect the early re
sults of decisions made b y a bank’s
management and it will trigger a
prompt investigation of those results.
I would emphasize, however, that
this office has no intention of making
banks conform to a theoretical average
or preconceived set of statistics. That
is not the purpose of the National Bank
Surveillance System. Banks are expect
ed to try different approaches, but this
office wants to be alerted to these per
haps innovative methods, as well as p o
tential problem areas. The NBSS will
41
assist us in this identification process.
Once a national bank has been iden
tified as a “ problem” by the NBSS or
a field examiner, the enforcement di
vision of the Comptroller s office may
be required to take a form of action to
assist the “problem” bank in resolving
its difficulties. These problems normally
constitute violations of law, rules, or
regulations and unsafe or unsound
banking practices. Some examples of
these are: Violation of lending limits
(12 U.S.C. 8 4 ); violations of provisions
governing the purchase of securities
by a bank from one of its directors
(12 U.S.C. 3 7 5 ); violations of loans to
executive officers (12 U.S.C. 375a);
violations of lending limitations on real
estate loans, commercial loans, etc. (12
U.S.C. 3 7 1 ); violations of Regulation
Z, Truth in Lending Act; a high per
centage of bank’s assets criticized by
one of the Comptroller’s examiners;
maintenance of a dangerously low
liquidity ratio; or, an insufficient level
of capital.
There are several actions available
to the Comptroller for attempting to
cure the above deficiencies. Among the
most drastic are: Revocation of a bank’s
charter (12 U.S.C. 9 3 ); appointment
of a receiver (12 U.S.C. 2 0 3 ); and
termination of FD IC insurance (12
U.S.C. 1818a). In addition, the Com p
troller has the power to publish exami
nation reports (12 U.S.C. 4 8 1 ), after
a substantial delay. Admittedly, these
remedies would only be used in cases
where the problem bank is in severe
financial trouble and, in fact, have
rarely been used.
Under the Financial I n s t it u t io n s
Supervisory Act of 1966 (12 U.S.C.
1818), the Comptroller was accorded
some intermediate administrative rem
edies that are of a less drastic nature
and are considered rehabilitative in na
ture. Commonly called the cease-anddesist provisions, they are intended to
assist the bank in reducing or elimi
nating its problems.
While the stringent measures avail
able to the Comptroller are considered
too harsh, the cease-and-desist order,
our immediate remedy, does require
some strengthening. Some improve
ment in the current cease-and-desist
power would be gained through en
actment of a bill currently before Con
gress, S.2304. Currently, only a bank
may be named as a party to a ceaseand-desist proceeding and only a bank
may be served with a temporary ceaseand-desist order. A final order, how
ever, may be directed not only to the
bank, but also to its directors, officers,
employees and agents.
Section six of S.2304 would permit
(Continued on page 72)
42
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Federal Reserve Bank of St. Louis
At ABA C red it C o n fe re n ce :
N on-Banking Influences Brought on Crisis
According to Panel o f O ld Time Bankers
HE BANKING INDUSTRY is not
the culprit responsible for the most
recent recessionary period, according to
the members of a panel of experienced
bankers, who discussed “ Banking’s
Greatest Challenge From the Perspec
tive of Experience” at the recent ABA
National Credit Conference in Atlanta.
Rather, they said, the poor economic
situation that the nation is now slowly
emerging from was caused by various
factors, including the Vietnam War,
poorly written holding company legis
lation and a nationwide speculative
fever.
Panelists included George Champion,
chairman,
Econom ic
Development
Council of New York City, Inc., and re
tired chairman, Chase Manhattan Bank;
George S. Eccles, chairman and CEO,
First Security Corp., Salt Lake City;
Sam M. Fleming, chairman of the trust
board, Third National, Nashville; and
Rudolph A. Peterson, retired president,
Bank of America, San Francisco. Panel
moderator was James E. Smith, Com p
troller of the Currency.
Banking, however, did make some
mistakes, the panelists agreed, includ
ing putting too much emphasis on
growth, forgetting the basics and not
profiting from the lessons it should
have learned from the depression of
the 1930s.
Mr. Fleming, in tracing the origins
of the recent recession, harked back to
the buildup of the Vietnam War, when
“ our political leaders told us we could
support both arms and butter without
additional taxation.”
W e believed them because we want
ed to, he added, despite the few “warn
ing voices in the wilderness,” such as
William McChesney Martin, then Fed
chairman, who, in the late 1960s, said
he saw disparaging similarities between
what was happening then and the con
ditions that brought on the depression.
Mr. Martin was scoffed at, Mr. Flem
ing said, particularly when the stock
market reacted adversely to his state
ment.
“ The nation was caught up in a spec
ulative fever,” he said, “that affected,
first, the stock market, then the real es
tate market. Growth was the estab
lished requirement of management and
the governing factor of what price earn
ings ratio a company’s stock sold for.”
Until 1970, he continued, banks were
considered too bound in by regulations
and supervision to keep pace with other
types of industry. The price of bank
stocks fell behind the market for other
securities and bankers were pressured
to show better results than normal in
bank growth permitted. Partly as a re
sult of this situation, and partly as a
means to circumvent anachronistic state
branch banking laws, the Holding Com
pany Act was passed in 1970 by the
unusual procedure of bypassing the
House Banking Committee and having
debate and action take place on the
floor of the House at a time when few
congressmen were in attendance.
The result, he said, was poorly
thought-out legislation. Banks were
allowed to expand by acquiring other
banks and also b y going into specific
bank-related activities, such as mort
gage banking, small loan firms, factor
ing and leasing activities, he said.
The responsibility for approving and
supervising such expansion was placed
in the hands of the Fed, Mr. Fleming
Com ptroller of the Currency Jam es E. Smith (c.) m oderates discussion by "o ld-tim er" bankers
at recent A B A N ational C redit Conference in A tlan ta. From I., Sam M. Flem ing, ch., Third
N at'l, N ashville; G eo rg e S. Eccles, ch. & C EO , First Security Corp., Salt Lake C ity; Mr. Smith;
Rudolph A. Peterson, retired pres., Bank of Am erica, San Francisco; and George C ham pion, re
tired ch., C h a se M an hattan, N ew Y ork.
MID-CONTINENT BANKER for May 1, 1976
" I sa id in th e la te s ix tie s th a t w e w e re b eg in n in g to do
th e th in g s th a t w e d id in th e tw e n tie s th a t ca u sed th e
tro u b le s in th e th irtie s. W e d id n 't ta k e n ote w h a t h a p
p en ed /'
—George Champion
said, but the law made no provision as
to how the HC itself, and, more im
portantly, the related financial activi
ties, would be examined.
“ The new law was no sooner effect
ed,” he said, “ than large city and cen
tral banks rushed to outdo each other,
bidding against each other for mortgage
and finance companies, and then ex
panding the new acquisitions beyond
managerial capacity and prudent rea
son.
“ To compound the evil, at about this
time the law gave a tax break to real
estate investment trusts, thus pouring
additional billions of dollars, seeking
high yields, into the real estate stream.
A real estate boom of unprecedented
proportions resulted. An apparent un
ending supply of money for all types
of projects, good and bad, was avail
able in the hands of unsophisticated,
growth-minded people.
“ Soon, as should have been expected,
problems arose,” he said. Projects were
delayed because of materials shortages
resulting from price and wage controls.
The price of materials and labor es
calated, rapidly distorting severe, take
out commitments of operators when a
project was not completed on time,
causing costs to exceed original esti
mates. Interest rates skyrocketed. The
entire situation ended up in the bank
ers’ laps.
During this period, there was regula
tion, but practically no examination of
new HCs, because enabling legislation
did not provide for it, Mr. Fleming
stated. Financially related HC affiliates
were improperly staffed and necessary
in-bank auditing checks and balances
were lacking.
“ The result of this almost unbeliev
able series of events is all too well
known,” he said. “ Non-accrual assets
skyrocketed and losses mounted. But
what is not well enough recognized is
the fact that, as soon as the situation
became apparent, banks lost no time in
beginning to strengthen their manage
ments and to put their own houses in
order. In time, well-managed banks
were working out of a difficult situa
tion.”
Mr. Fleming said that the worst is
over and that progress in correcting a
bad situation is being made. HC ex
aminations are being conducted by the
Fed and management now is much
wiser, having learned the hard way that
proved policies, such as don’t borrow
short and lend long or the necessity of
subordinating growth to sound banking
principles, still prevails.
Younger bankers, he continued, have
learned that leverage has its limitations
and must bow to liquidity and asset
management.
Mr. Peterson tied the emergence of
HCs and the internationalizing of U. S.
banking together, stating that they were
the result of the forces at work in the
marketplace to some extent. He termed
them both positive phenomena and said
he is convinced that the success of the
banking industry depends on how well
banking takes advantage of both as
they continue to evolve.
“ If we expect to understand the im
plications of these phenomena for the
future,” he said, “we must unburden
ourselves of the notion that growth of
HCs and the expansion of banks locally
is the result of some grand design or a
conspiracy.”
Both trends were accelerated by farranging events taking place in the mid
dle sixties, he said.
The U. S. was in a costly war that
was not funded by taxes, he said, and
it was immersed in a series o f ambitious
domestic programs that were funded by
inadequate taxes. This caused a balance
of payments deficit that led to what we
now know to be the “most pervasive
and longest period of inflation in his
tory.”
Mr. Peterson said that both our gov
ernment and those of major trading
partners sought to reduce the market
impact of this situation with one form
of restraint or another. In one January
weekend in 1965, for instance, Presi
dent Lyndon Johnson put a lid on U. S.
direct foreign investments and created
a mesh of so-called voluntary restraints
on banks doing business overseas to
augment the already imposed interna
tional interest-equalization tax. “ The
effect was to close U. S. sources of
U. S. dollars to foreigners and to force
U. S. banks to expand overseas,” he
said.
The U. S. economy was still in an ex
pansionary cycle, he continued. Cor
porations were eagerly seeking new
markets wherever they could find them.
The government sought to mix d o
mestic economics with global diploma
cy that created a situation comparable
to placing a lid on a steaming cauldron.
“ Inflation accelerated along with in
flation expectations,” he said, “ monetary
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Federal Reserve Bank of St. Louis
authority tightened credit and we
learned the meaning of the term ‘credit
crunch.’ The euphoric investor public
began viewing savings interest the same
way it views stock yield and the rapid
flows of hot money brought legislative
attraction to protect one group of fi
nancial institutions— notably S&Ls and
thrifts— at the expense o f commercial
banks.
“ The
Administration,
meanwhile,
stepped up the war in Vietnam and cut
taxes. Inevitably, commercial banks
sought funds to satisfy clamoring cus
tomers in offshore centers and inevi
tably new forms of obtaining money—
with numerous ingenious financial in
struments— proliferated.”
Mr. Peterson said the conclusion from
all this is that the existence of the HC
is not the cause of the problem. He
added that the problems have been less
damaging than they might have been
because the banking industry is well
managed and innovatively structured.
The economic turmoil that has occurred
has been better than what would have
occurred had a major financial break
down taken place. He added that the
vast majority of HCs is being run pretty
well today, offering good and needed
services.
“ As for the trend of internationaliza
tion,” he continued, “ there’s no rational
way to avoid it. Internationalization of
American business was not a trend of
the 1960s, it’s been going on since
W orld W ar One. And if American
banks don’t follow their business cus
tomers to new markets, their offshore
competitors will.
“ If our goal is a world that is stable
politically, and productive economical
ly, we must do more than just see that
the nations on this planet are interde
pendent, one on the other. W e have an
obligation, moral as well as pragmatic,
to make interdependence work.”
He concluded b y stating that “ our
most immediate danger lies in tiying
so hard to eliminate all risk in the
world that we create a mutation that
will leave us a population o f financial
eunuchs.”
Mr. Champion said that, among the
mistakes bankers have made is that, in
planning for the future, “ we didn’t
study the past. I said in the late sixties
that we were beginning to do the things
that w e did in the twenties that caused
the troubles in the thirties. W e didn’t
take note what happened.”
He pointed out, however, that things
are different today than they were in
the thirties. For instance, there was no
F D IC then to protect bank customers.
He also said that, in the thirties, “ there
wasn’t any kind of press that thought
it should tell us how to do it. There
wasn’t any academia to teach us how
to be critical but not analytical. W e had
43
the Fed and the Comptroller and the
Potomac was not then surrounded by
administrative mine fields that feel they
should be directing our every move.”
He called on bankers to defend their
industry against regulators in Washing
ton who think they have “ to direct
everything in America.” He called on
bankers to set their own standards and
chided bankers for not blowing the
whistle on those who were not acting
prudently.
He said he was optimistic that bank
ers are going to move in the right di
rection, “ but I don’t think w e’re going
to move anywhere unless we show self
discipline and individuality and tell the
bureaucrats where to go!”
Mr. Eccles defended the HC con
cept, stating that it is not faulty. Rather,
he said, HC management has been at
fault for expanding too fast and taking
on non-related activities. He blamed
supervision as being faulty and stated
that regulation cannot be handled by
a single agency. He urged regulators to
wait until the expansion period for HCs
is over before finalizing regulations.
He said the earnings stream from HC
affiliates has been good in the past and
will remain so in the future. * *
Loan P o rtfo lio A dm in istra tio n :
A Num ber o f Actions Need to Be Taken
To Establish, A dm inister C redit Policy
By A. ROBERT ABBOUD
Chairman
First National Bank
Chicago
B\lOU SLY, there is no one single
action that will do the whole job
in the area of loan review and credit
administration. There are a number of
actions that can be taken.
The first is to establish credit policy.
There should be clear articulation of
what sector of the market the bank
seeks to serve, what limits in terms of
totals it wishes to have in any one kind
of loan and what policies it chooses to
follow with regard to secured and un
secured, guaranteed or unguaranteed.
These broad standards must be es
tablished by senior management. In our
bank, the formulation of such standards
is assigned to the credit policy com
mittee— one of the three most impor
tant committees in our organization.
Once the overall credit policy is es
tablished, it is necessary to administer
that policy. And the best way to do
this is not to put bad loans on the
books.
What are some of the procedures
that make it difficult to put bad loans
on the books?
• Determine a credit classification
system that ranks credits from “ excel
lent” to “ poor.”
• Make each loan officer rank every
credit when it first goes on the books
and record that self-classification in the
credit files.
• Require each loan officer to make
an annual review of each of his credits,
record the findings of that annual re-
0
This article is adapted from remarks
made by Mr. Abboud at the ABA’s
National Credit Conference in Atlanta
in March.
44
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Federal Reserve Bank of St. Louis
view in the credit file and, once again,
make a self-classification and record it
in the credit file.
• Establish a loan review division
independent of the lending departments
and require that loan review division to
make its own annual independent clas
sification of each and every credit world
wide and record this classification in the
credit files. The dual procedure of
classification by the loan officer in con
junction with the annual review fol
lowed by an independent loan classifi
cation by the loan review division per
mits senior management to rate the
judgments of both the loan officers and
the loan review division.
• Publish clear sets of instructions
to the lawyers who work with the loan
officers in setting up a loan. Senior
management must tell the lawyers in
what areas the loan officer is permitted
to establish specifications and in what
areas the specifications are only to be
established by senior management.
• Build a good, strong discount de
partment with a seasoned and experi
enced credit officer in charge. The best
defense is not to permit an improperly
constructed loan from going on the
books. The head of the discount de
partment is the “ gatekeeper.” If the
note and the accompanying documents
aren’t in order, the loan doesn’t go on
the books. And the organization must
be made to understand that senior
management intends to back the dis
count department fully.
• Publish a clear set o f lending au
thorities and make sure that each lend
ing officer signs off annually that he or
she understands what that lending au
thority might be. Make sure that the
discount department has a list of these
lending authorities and hold it respon
sible for refusing to put through new
loans or increases to existing loans un
less the notes carry the initial of an
officer authorized to approve a trans
action of that size.
• Emphasize the importance of the
collateral cage. Require that all col
lateral be current and up to stipulated
levels. Once again, changes in collateral
requirements should only be imple
mented if authorized in writing by an
officer with authority to do so. Any
shortages in collateral should be
promptly brought to senior manage
ment’s attention.
• Emphasize the importance of the
credit department. It’s not just a place
A p pearing on panel discussing loan portfolio adm inistration at the A B A N ational Credit
Conference in A tlanta w ere (from I.) Reuben F. Richards, e.v.p., C itibank, N ew Y ork; A. Robert
Abboud, ch., First N at'l, C hicag o; M oderator Richard F. Ford, pres., First N ational Bank in St.
Louis; and Richard L. Kattel, ch. & pres., Citizens & Southern N at'l, A tlan ta. At e arlier luncheon
session, Mr. Abboud w a s recipient of ABA 's Eag le A w a rd in recognition of his significant
contributions to banking.
MID-CONTINENT BANKER for May 1, 1976
to house the files and to service requests
for credit checks. It should be charged
with responsibility to determine that
the files are current and complete, that
extraneous or old materials are with
drawn and sent to the warehouse, that
memoranda in the files coincide with
and support assertions in the formal
write-ups, which in our bank we call
credit commitments, which, in turn, are
approved by the executive committee.
In too many instances, we have had
the credit commitments indicate one
thing, and, when the credit file was
checked, the impression was quite dif
ferent. It should be the responsibility
of the credit department to make sure
that assertions in the credit commit
ments are supported by materials in the
credit files, and discrepancies, if any,
brought to the attention of senior man
agement.
• W e also have a division called
“ travelling auditors” and its duties in
clude auditing the receivables and in
ventories of customer accounts, as well
as preparing cash budgets for the loan
officers servicing these accounts. Re
cently, we have not properly utilized
the protective services of this division
and we com pounded the error by hav
ing it report to a unit in the corporate
banking department.
Under our new alignment, the trav
elling auditors will report directly to
the chairman of the credit policy com
mittee. Not only will it perform its
policing function, but it will also serve
as a training ground for management
trainees wishing to be assigned to lend
ing activities— both in the bank or any
subsidiary.
To be effective, the loan review di
vision must be free of any intimidation
by any of the lending departments.
Conversely, of course, its ratings must
be balanced and exhibit good judg
ment. Our loan review division reports
administratively to the chairman of the
credit policy committee and function
ally to the general auditor, who, in
turn, reports directly to the board of
directors.
Finally, there must be direct involve
ment by senior management in the de
tails of the major credits, particularly
the more sensitive ones. The impact on
the organization is remarkable when
one of the seniors calls a loan officer
into his office and discusses a particular
credit in some detail. This not only
keeps the organization on its toes, but
also imparts confidence and re-affirms
standards. D on’t get the reputation in
the community of being a “ soft touch’
bank and don’t be afraid to play the
“lone w olf” and stand up and be count
ed when you think you’re right.
Obviously, all of this elaborate pro
cedure is expensive to administer prop
erly. This is why we must price our
product adequately. Too often, we have
underestimated the cost of proper and
effective credit administration. Perhaps1
w e weren’t giving it the necessary at
tention and priority. And so, it was
probably natural that we underesti
mated the cost. But now that the prior
ities are rapidly being re-established,
Loan P o rtfo lio A d m in istra tio n :
Q u a lity Should Be Goal o f Loan P o rtfo lio ,
But How Do W e G et There From Here?
By RICHARD L. KATTEL
Chairman & President
Citizens & Southern National Bank
Atlanta
HE D R IF T of what I hear about
loan administration from bankers
all around the country is the same:
“ W e’re all going to be looking for qual
ity, and w e’re less willing to reach for
loans.” The question is, “ H ow do we
get there from here?”
W e’ve all built better systems and
are getting better information in the
loan administration area. I’m sure many
bankers, as w e did, looked at their
lending procedures and guidelines and
modified them in light of current ex
perience. W e’d be foolish if we didn’t
do this; but the key ingredient to im
proving the loan portfolio is the train
ing and the controlling of lending o f
ficers and instilling in them and in our
selves a discipline to stick to the pol
icies we set up.
I say this because the most common
problems we’ve seen are our mistakes
rather than mistakes of our borrowers.
After a review of every charge-off in
our bank for 1975, we came up with a
number of recurring themes.
First, in many cases, we relied too
heavily on collateral to bail us out.
Then, we either valued it incorrectly,
failed to determine its marketability,
or failed to control it when necessary.
W e either failed to properly appraise
management quality or assumed that
good management could overcome
some pretty obvious deficiencies on the
balance sheet or elsewhere.
W e didn’t get adequate information.
W e loaned far too much to highly
leveraged borrowers.
W e forgot the importance of char
acter.
W e didn’t maintain proper control
T
This article is adapted from remarks
made by Mr. Kattel at the ABA’s Na
tional Credit Conference in Atlanta in
March.
MID-CONTINENT BANKER for May 1, 1976
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Federal Reserve Bank of St. Louis
let’s make sure we get paid enough to
cover the cost and still make a profit.
I don’t mean to imply that all of the
above is, as yet, fully in place at First
Chicago and operating satisfactorily.
Truthfully, we still have some distance
to go, but the process is well underway
and there should be no question in any
one’s mind about our commitment. * *
of the credit, or somehow didn’t get the
whole story.
W e experienced a lack o f proper
documentation.
W e confused innovative lending with
being the only unsecured creditor in a
deal.
Since w e’re still working out from
under the 1973-1974 real estate crash,
it’s not likely that we can look forward
to dramatic results in the near term
from the changes w e’ve made. But,
while it’s fresh in our minds, w e’ve
done our best to use the lessons I’ve
just mentioned.
From the point of view of loan ad
ministration, the changes we made
were pretty simple.
For the first time in our recent his
tory, we assigned lending limits to all
banking officers. Beyond that limit, the
officer must get supervisory approval.
W e set these limits based on the size
of the portfolio of the branch or de
partment and the experience of the of
ficer. W e also made it clear that when
formal approval by higher authority is
required, this does not relieve the loan
officer of the responsibility for his de
cision, although it does signify the su
pervisor’s joint responsibility for ad
ministration o f the credit.
W e also set an absolute dollar limit
on the size of credit which can be main
tained on the books for a branch or de
partment.
W e cleaned up our credit review
committees. W e always thought of
these as our first line of defense, but
we found we had to put teeth into them
and tell them exactly what they were
supposed to do in order to get results.
W e continued our internal system of
rating credits according to quality, as
well as size.
W e require the members of each
credit review committee to make a
semiannual written appraisal of each
lending officer who reports to it so we
have a continuing permanent record of
each officers’ performance in the spe
cific area of credit judgment.
O f course, our system credit function
45
pulls regular exams o f all the loans in
a branch or department to get a feel
for the overall portfolio quality and to
look specifically for documentation de
ficiencies.
W e’ve designated some industry
specialists and consolidated all our
lending to certain industries to that
group of officers.
After setting up this framework, we
follow ed up with specific “ do’s” and
“ don’ts” and drilled these into each o f
ficer. Probably the most important sin
gle lesson we try to teach them is to
ask for help when they need it.
W ith this in mind, let’s take a look
at the overall thrust of our asset man
agement.
I’ve designated a general officer of
the bank for asset management, with
system responsibility to see that our
portfolio conforms to our expectations
and policies in all respects. He has di
rect responsibility for the planning
function, credit administration and re
covery.
His blueprint is our five-year plan
for the bank. This plan is updated an
nually and it is the game plan which
ties together all activities. This is the
vehicle for coordinating the growth of
assets and liabilities and coming up
with the mix we’re looking for.
This five-year plan is a composite of
those submitted by our 23 major profit
centers at the beginning of each year.
Each of these profit centers works up
its own asset management strategy, in
corporating certain assumptions and fi
nancial management standards that
we’ve adopted for the bank as a whole.
Then these plans are consolidated and
adjustments are made to assure that
the parts equal the whole.
Our fundamental assumption is that,
over the long pull, the Southeast will
continue to grow but will be capital de
ficient, providing ample lending oppor
tunities for us.
In light of our recent experience, we
revised
the
financial
management
standards that will serve as the founda
tion of our asset growth. These stan
dards deal with capital adequacy, li
quidity, interest sensitivity, stability of
earnings, desired return on equity and
desired dividend payout. These have
been communicated to the heads of our
profit centers for incorporation in their
plans.
In coming up with a mix of loans,
w e’ve told each profit center head there
are five basic desired characteristics
w e’re seeking. These are in no partic
ular order of priority.
W e’ve told them we want quality.
W e’re looking for liquidity— and here
we’ve given them some standards by
which to measure this factor.
W e’re looking at return, including
both interest yield and any other bene-
46
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Federal Reserve Bank of St. Louis
fits, such as deposits, which may be
derived from the total customer rela
tionship.
Interest sensitivity is the degree to
which the interest yield on the asset
moves in coincidence with the interest
cost of money-market funds that we
employ. Our objective here is to main
tain the balance in interest sensitivity
and total assets with total liabilities.
Loans should be employed in a way
that will create economic growth o f our
local markets. W e believe the long-term
growth of our bank will be determined
largely by the growth o f our local mar
kets. The growth of core deposits will
be the single most important factor
shaping the growth of the bank, and it
is largely from our local markets that
these core deposits must be derived.
The ability of our markets to grow will
depend on the financing provided by
the banks in those markets. W e must
be willing to support the growth of
payrolls, sales and other productive
economic activity.
W e’ve told our profit centers that
lending resources are scarce and that
they are, in fact, competing with others
within our system to put together the
kind o f portfolio that most closely con
forms to these qualities.
All of this is methodology, or the
kinds of things we consider in managing
our loans and planning our asset mix.
But the most important factor in the
quality of our portfolio is the manage
ment of our people who are putting
these policies into action. I believe
lending is still more an art than a sci
ence, and the artistic part is guiding
our lenders to balance our bank’s ob
jectives with the needs of the market
place. So, a great deal of responsibility
lies with the individual lending officer.
W hat w e’ve tried to do is to give
our loan officers enough flexibility and
freedom to encourage them to use in
dividual initiative. What we don’t want
is a lending officer bucking each deci
sion to a committee. The controls and
central direction we’ve installed have
been done from a policy viewpoint.
W e said to our loan officers: “ Here
are your limits, here are our objectives,
here are our standards. N ow you must
evaluate these in light of your custom
er’s needs.” W e ’ve tried to follow this
up with more emphasis on professional
ism in lending, better training and, in
general, a better effort in matching each
officer’s experience and capability with
the authority he’s given.
W e want our officers to be bankers
with initiative and imagination, but
w e’ve instilled in them a discipline that
they did not previously have.
The key word is discipline— to stick
to what we’ve set out to do, both as
managers and as lenders. * #
Loan P o rtfo lio A d m in istra tio n :
W h at A re the Factors That M a ke Lending
Profitable or U n profitable for Banks?
By REUBEN F. RICHARDS
Executive V ice President
C itiban k
N ew York City
VERY BANKER has his own opin
ion on just what it is that deter
mines the profitability of a loan. I’m no
exception.
Certain pat formulas come quickly to
mind. Increment over base (or prime)
rate plus value of balances and fees,
for one. Or loan rate minus funds cost
plus earnings on balances, for another.
Certainly, equations like these do re
late to loan profitability in the sense
that they are useful in measuring the
profitability of a loan— after the fact.
But that is all they are— measurements
to tell us how we fared on one loan as
against another in our portfolio.
A determinant of profitability, how-
E
This article is adapted from remarks
made by Mr. Richards at the ABA’s
National Credit Conference in Atlanta
in March.
ever, strikes me as another kind of
animal altogether— far different from a
pure mathematical measurement. In
fact, a determinant cannot be reduced
to a simple formula. Rather, determi
nants are those factors behind the num
bers that actually make bank lending
profitable or unprofitable.
I want to divide these factors into
three parts.
• First: those consistently applied
factors that are fundamental to loan
profitability— namely,
pricing policy
and a measurement system.
• Second: a factor that I believe will
change over time— of utmost impor
tance today, but likely to diminish in
importance in the future— the factor of
usage.
• Third: loan losses—a determinant
which has an undisputed effect on the
bottom line of any bank. Given the
loan-loss experience of the banking in
dustry during 1975, I think you’ll agree
that the subject is essential to any in
formed discussion o f profitability. Yet,
interestingly enough, as recently as two
MID-CONTINENT BANKER for May 1, 1976
Call Red.
Maybe you’ll be lucky
and get Cheryl.
When our fop correspondent
banker, Glenn P. "Red” Ward is
out of town, Cheryl Cross minds
his business - and she can
probably help with your’stoo.
No matter what your ques
tion may involve, Cheryl
knows where to find the an
swer. She knows our people,
and she knows their specific
talents.
C a ll Red. Or, c a ll Wilbur
Waters. Keep your fingers
crossed and hope for a soft
voiced answer.
Call Cheryl, the better
banker's banker.
(918) 587-9171
Tkilsa,Oklahom
a
Member F D I C
MID-CONTINENT BANKER for May 1, 1976
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Federal Reserve Bank of St. Louis
47
years ago, analyses of loan profitability
frequently played down— and some
times omitted— the loan-loss factor.
Let’s consider these three categories
in order.
A consistent pricing policy, much
like credit policy, is a cornerstone of
profitable lending. To be effective, a
bank’s pricing policy must be centrally
set at a senior level within the bank.
This is the only way to be sure that
pricing is effectively coordinated with
the entire asset-liability structure of
the organization.
A pricing policy must establish guide
lines and minimums. They shouldn’t
be carved in stone, however, because
they will need adjusting from time to
time, as money market and competitive
conditions change. The central admin
istration of pricing policy also allows
senior management to make appropri
ate trade-offs among such overriding
bankwide objectives as growth rate of
risk assets, liquidity, capital adequacy
and— last but far from least— market
penetration.
Pricing policy must also be target
oriented so that every lending officer in
the bank clearly understands the goals
set by the organization. These target
amounts should be ample to cover all
fixed and variable expenses associated
with the lending business— including
adequate provision for loan losses. Cer
tainly, the targets should define a goal
which, if achieved, would allow the
bank to reach a specific earnings goal,
meet a specific return on equity and
maintain or improve capital ratios.
None of this is meant to imply a
rigid set of pricing guidelines. In the
real world, where a stream of curve
balls flies at us from all directions, the
last thing we need is rigidity. Pricing
policy must be flexible enough to per
mit lending officers to price in a variety
of ways— both to meet competition and
to meet the particular requirements of
various customers.
Simply put, the policy should not
prevent lending officers from pricing
their transactions in whatever way is
appropriate— provided the bottom line
is right. Within this flexibility, however,
certain barriers must be erected to as
sure that loan pricing does not becom e
speculative. The business of banking—
in essence— is acquiring funds and pro
viding credit to borrowers at a prede
termined spread. In my opinion, it is
not our business to provide insurance
against rate fluctuations. Given the var
iable rate funding which most of us
rely on, clearly the rate risk must be
for the account of the borrower. Thus,
any sound pricing policy will actively
discourage speculative pricing tech
niques. In this category I include such
exotic items as fixed rates, cap rates
and collars. I realize that all these in
48
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Federal Reserve Bank of St. Louis
Confidence Rem ains Strong
Public confidence in the safety of
money deposited in bank accounts
has grown in the past year and, at
the same time, concern over bank
failures is low, a Gallup survey in
dicates.
That survey, commissioned by the
ABA, revealed that 93% of those in
terviewed believe that their money
deposited in bank accounts is either
very safe or fairly safe, up slightly
from the 90% reported a year ago.
Sixty-six percent of those inter
viewed feel that the problem of
bank failures is not too serious, or
not at all serious. Only 8% believe
it is very serious.
novations were hailed as imaginative
products when they were first dreamed
up, but our bottom-line experience so
far is that most of these gimmicks end
up costing us money.
Unfortunately, even floating rates oc
casionally create profit problems for a
bank, so it is important always to con
sider alternative pricing techniques.
Pricing policy should encourage— if
not require— pricing that will protect
the bank during the next inevitable re
turn to tight money and a probable
period of constrained rates. There are
two commonly used protective tech
niques. One is an alternate base rate
tied to a money-market rate, such as
short-term commercial paper. The other
is an open rate in which the actual loan
rate is not determined until the time of
borrowing.
I have a particular preference for
open pricing on commercial paper back
stop lines. Because we live in a highly
competitive financial environment, how
ever, this type o f pricing will not al
ways be possible. But for certain types
of credit facility, it is becom ing more
common and represents added insur
ance against loss of profitability during
tight-money periods.
To summarize the pricing area, I b e
lieve clear and concise pricing guide
lines are indispensable to loan profit
ability. To be fully effective, this cen
trally set policy should not bind lend
ing officers to fixed prices. Rather, it
should define the outer boundaries
within which they have the requisite
flexibility to deal with individual cases.
The next fundamental of loan profit
ability is a consistent measurement sys
tem. As with pricing, the measurement
system must be flexible enough to ap
ply across an entire portfolio. Once in
place, the measurement system should
be able to evaluate each loan, not only
against the policy guidelines, but
against all other loans, regardless of
type. Only then can variances in profit
ability between loans be correctly an
alyzed in terms of contributing factors,
such as risk of transaction, or possibly
the type of loan itself.
At Citibank, we have adopted the
net spread concept as our uniform
measurement system. Simply defined,
net spread is the revenues associated
with a loan expressed as a percentage
of funds outstanding. It represents rateof-return measurement. But more, it
encompasses all funds-related income
and expense, including increment over
base rate (if any), base-pool spread
(whether positive or negative), fee in
come and earnings from balances.
The net spread can be calculated for
any particular loan or for the entire
portfolio. Going one step further, if we
include all non-funds expenses and
revenues, then deduct taxes, we arrive
at a return on risk assets— more com
monly known as “ RO R A.”
Although the net spread indicates
our gross margin, it is by no means the
only measurement on which we should
focus. W e know, for example, that a
loan with little usage may have an ex
tremely high net spread. But the ab
solute dollar earnings it brings down to
the bottom line may be much less than
a similar loan with greater usage. A c
cordingly, the net spread should always
be viewed in conjunction with the bot
tom line when evaluating earnings tar
gets.
At this point I’d like to backtrack to
the base-pool spread. Obviously, one
crucial aspect of any measurement sys
tem is determining the cost of funds
employed— what we call the pool rate.
In pricing our loans, we have found
that the best definition of the marginal
cost of funds is “ the cost of the next
dollar from an open market source
available in quantity.” For this purpose,
the CD rate is usually a reliable indi
cator of the marginal cost of funds.
However, a few years back, when CD
rates were restricted under “ Regulation
Q ,” the marginal cost of funds shifted
to the Eurodollar market as the only
source which could be tapped in depth.
Finally, as to the measurement sys
tem, it must distinguish clearly between
balances supporting credit and balances
supporting activity. At Citibank, we do
not permit balances to be doublecounted. If you allow that, you are just
kidding yourself and your stockholders.
With pricing policy and measure
ment system in hand, the fundamentals
of profitable lending are complete. Un
fortunately, as we have all learned, it
doesn’t end there. So, I come to an
other important determinant of profit
ability— usage.
In today’s world, usage plays a dom
inant role in determining the bottom
line in the lending business. Neither
our measurement system nor any other
yield-forecasting device can be truly
MID-CONTINENT BANKER for May 1, 1976
effective without fairly accurate as
sumptions about usage. With the single
exception of write-offs, usage is prob
ably the leading determinant of loan
and portfolio profitability.
The net spread for any given period
is always a direct derivative of usage
under a facility. In other words, even
given the base rate, the marginal cost
of funds, the increment and the balance
arrangement— one still cannot compute
the spread without knowing (or esti
mating) usage. Yet this factor is per
haps the most difficult to predict and
control.
It seems ironic to me that loan profit
ability in a bank should be so utterly
dependent on the most commodity-like
aspect of our business. And yet, the one
truly unique capability of our industry
— providing availability to potential
borrowers— has never been properly
compensated. The facility fee was a
positive step toward correcting this
lapse. I would not be surprised to see
further evolution—-and
substantially
greater success— in the future unbun
dling of loan pricing.
The final factor determining loan
profitability, already mentioned, is loan
losses. Somehow the notion has be
come deeply rooted in the history of
banking that an increment over the
base rate represents adequate compen
sation for risk. But unfortunately, that
increment only partially compensates
for loan losses. W e are heavily depen
dent on the law of averages and, of
course, our own good credit judgments,
to realize a profit on our loan portfolio.
Let me offer an example to suggest
just how dependent we are on judg
ment and averages. Given our return
targets at Citibank, and assuming a
50% tax rate, a million-dollar loan loss
wipes out one full year’s after-tax earn
ings on a portfolio of $67 million! Or to
turn the matter around, a banker mak
ing 67 $ 1-million loans has to be right
on 66 out of 67— just to break even!
That means a batting average of .985
or you don’t get to first base. The ex
ample is simplistic, but it illustrates the
mental attitude required of lending of
ficers— an attitude I don’t see every
day.
On existing portfolios, of course, the
die is already cast. Here, control of
credit losses depends heavily on an
early warning system to identify p o
tential problems. And the more serious
cases should be tracked on a monthly
basis.
Perhaps out of our recent experiences
with problem loans we have salvaged
at least one positive benefit. W e now
have the advantage of a lending officer
corps that has been through a difficult
period, learned some valuable lessons
the hard way and will now be able to
evaluate new credit requests on a more
informed and realistic basis. • #
C red it P o licy —B ro a d Issu es
Traditional V iew of Loan P o rtfo lio Q u a lity
Neglects Factors of Significant Importance
By JA M ES V. BAKER
Senior V ice President
Fidelity Bank
O k lah o m a City
HE T R A D IT IO N A L view of loan
portfolio quality has invariably
focused on the ultimate collectability
o f various loans. This myopic view of
quality neglects several other factors
of significant importance, such as li
TWO ASSEMBLIES FOR
BANK DIRECTORS
MID-CONTINENT BANKER for May 1, 1976
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
quidity, diversification, profitability and
capital position.
The importance of all these factors
cannot be underestimated, as evidenced
by the recent surge in bank failures.
Since January 1, 1975, 17 bank failures
have occurred with 13 taking place in
1975 and four in 1976 (at the time of
this writing). In general, those failures
resulted from a lack of loan quality in
September and November, 1976
THE 25TH ASSEMBLY, AT THE BROADMOOR,
COLORADO SPRINGS, COLORADO
SEPTEMBER 4-7,1976
THE 26TH ASSEMBLY, AT PINEHURST HOTEL &
COUNTRY CLUB, PINEHURST, NORTH CAROLINA
NOVEMBER 4-7,1976
Treating Developments Important To Bank Directors
including:
Recent Developments in Director Liability; Board
Functions and Committee Organization; The Di
rector’s Role in Bank Audits; Marketing Services;
The Implications of EFTS; and Capital Needs in
Banking.
Registration limited to 200 directors per Assembly, and
their spouses. Faculties of thirty will serve each Assembly.
For information and programs of The Assemblies, write to
DR. RICHARD B. JOHNSON, President
THE FOUNDATION OF THE SOUTHWESTERN
GRADUATE SCHOOL OF BANKING
SMU Box 1319
Dallas, Texas 75275
or call A/C 214/691-5398
49
its broadest sense.
Numerous bankers have appropriate
ly noted that earnings are the first line
of defense for loan losses. It is interest
ing to observe that, last year, the
banking industry recorded another ex
cellent earnings year despite all the
well-publicized problems with specific
types of credits and the accompanying
large charge-offs. The return on capital
for the banking industry in 1975 ex
ceeded 10% for the ninth consecutive
year. In the 48 years since 1928, there
has been only one other year— 1945—
when the banking industry’s return
equaled or exceeded 10%.
W e were able to achieve yet another
record earnings year because of im
proved pricing and beneficial spread
relationships. The spread between the
prime rate and the federal funds rate
averaged 204 basis points in 1975, and
that was the largest spread since 1961,
when we had 293 basis points. Our
1975 spread was the third largest fav
orable spread in the last 21 years.
Without question, the differential be
tween the prime rate and federal funds
will narrow during 1976 as the eco
nomic recovery continues to gather m o
mentum. The spread this year will
DIRECT MARKETING
IDEA KIT
Make your own kind
of profitable music
with direct marketing
probably average 140 basis points, rep
resenting a 30% decrease from last year.
Such a spread would still be relatively
high, based on recent history.
Looking forward to 1976 and 1977,
I am enthusiastically optimistic. A sig
nificant number of banks, corporations
and individuals have been able to re
establish integrity in their balance
sheets by obtaining a better balance
between their short-term assets and lia
bilities. The progress which has already
been made is a mere first step that will
be reinforced by a 20% to 25% increase
in corporate profits and wage gains in
excess of inflation.
The economic recovery and abating
inflation, along with the improved bond
and stock markets, have already al
lowed some borrowers the opportunity
to refinance burdensome short-term
debt positions. At present, this trend
is primarily evident only among the
AAA- and AA-rated credits. Gradually,
however, the trend should expand to
include the A- and Baa-rated credits.
This article is adapted from remarks
made by Mr. Baker at the ABA’s Na
tional Credit Conference in Atlanta in
March.
BANKS CONDUCTING
aggressive marketing
programs often expect the
broadcast or print media to carry
the theme alone. This works well
up to a point, just as a symphony
orchestra can sound pleasant
even without its percussion
section.
FOR HARMONIOUS, optimum
results, however, bank marketers
need every available instrument.
The percussive impact of direct
mail should not be overlooked. It
can accent in a personal way the
broad theme of the mass media.
Discussing the broad issues of credit policy at recent A B A N atio nal Credit C onference in
A tla n ta , w ere (from I.) C h arles H. Pistor Jr., pres., Republic N at'l, D a lla s; M oderator John A.
Hooper, e.v.p ., C h a se M anhattan, N ew Y ork; Ja m es V . B aker, s.v.p ., Fidelity Bank, O klahom a
C ity; and Ralph B. G ilpatrick Jr., s.v.p ., Mellon Bank, Pittsburgh.
TENSION has a full range of
direct mail instruments,
envelopes and market-by-mail
systems, gained from years of
working closely with major direct
marketing bankers. May we send
free our Direct Marketing Idea Kit?
C red it P o licy —B ro a d Issu es
Realistic Loan Q u a lity Standards Needed
Attach coupon to letterhead. No foreign inquiries.
Because o f Economic Environm ent Impact
By RALPH B. G ILPATRICK JR.
Senior Vice President
M ellon Bank
Pittsburgh
TENSION ENVELOPE CORP.
816 E. 19th St., Kansas City, Mo. 64108
□ Send F R E E D irect M arketing Idea
K i t ...D R U S H ! Need is im m ediate...
□ Standard processing okay.
HE QU ALITY of loan portfolios has
been impacted during the past
couple of years by the economic en
vironment. It is important, therefore, to
keep in mind the need to maintain
realistic and consistent loan quality
standards.
T
Company.
I
Address__________________
City________________State.
50
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Zip-------T E 374
*
t
Our basic approach in trying to de
termine the quality of our portfolio is to
utilize a variety of financial ratios,
many of which are familiar to all of
you. After analyzing these ratios, we
set standards for various classifications
and compare each borrower against
these standards in order to determine
into which classification the borrower
should fall.
Obviously, other criteria besides fi
nancial ratios are essential to the qual-
MID-CONTINENT BANKER for May 1, 1976
ity gradings. Some of the other factors
we consider are the company’s ability
to access capital markets in different
economic situations, its management’s
capabilities and its position within the
industry.
Our purpose is not simply to identify
high-risk or marginal loans, but to zero
in on the entire loan portfolio, includ
ing the prime customers. The basic
reason for this is that any credit can
deteriorate rapidly. W e have made it
a point of emphasis that all loans will
undergo continuous review under this
system. Lower-quality ratings will, out
of necessity, be reviewed more fre
quently than prime credits, but, in any
case, all credits will be reviewed peri
odically.
The rating of the various loans has
a number of benefits other than ana
lytical. The administration of credit
policy becomes more consistent and
enables a bank to provide more realistic
loan pricing. Another obvious benefit
is that it targets credits that should
bear more than normal credit analysis
and, further, it targets companies where
we would hope to increase our pene
tration.
A thorough knowledge of the volume
of lines and commitments and their
related borrowing patterns is essential
to successful loan management and
adaptation to changing economic con
ditions. It is important to know the
relationship between total commitments
and the unused portion of those com
mitments in order to achieve a sounder
management of funds supporting those
commitments.
A solid grasp of the usage patterns—
this is the percentage of how both lines
and commitments have been used in
business cycles— enables a banker to
simulate a variety of alternative plans
and react much more quickly to any
significant change in economic condi
tions. That is, if usage rates reach cer
tain levels, what probable loan levels
will be attained and what will be the
level of purchased funds necessary to
support those loan levels? This is im
portant in policy planning for asset
and liability management.
T o accomplish this task, w e have
developed a system utilizing computer
techniques to analyze the quality of
our portfolio, trace the borrowing pat
terns over a historical period and con
tinually update the information to pro
vide us with the best management
information on which to develop our
loan posture. * *
Presenting
^ the
E E 3
Æ
or
a
BANKERS
A Sensible Risk {t
Management
Program In One
Step- By-Step
Practical
Desk Top
Reference Guide
N ow every c o m m e r c ia l b a n k e r c a n u n d e rs ta n d ,
p la n a n d m o n ito r a s e n sib le p r o g r a m o f R isk
M a n a g e m e n t. T h is n ew , c o n c is e m a n u a l h elps
yo u m e a s u re all the loss e x p o s u r e s you
fa c e ...s h o w s h o w to r e d u c e n e e d le ss a n d costly
in s u ra n ce g a p s o r o v e r la p s ...a id s y o u in
e sta b lis h in g a fu ll-d im e n s io n a l risk m a n a g e
m en t p r o g r a m , in c lu d in g loss fu n d in g , to
co n s e r v e y o u r b a n k assets a n d get m o r e for
y o u r in s u r a n c e a n d p r o t e c tio n d o lla r.
T h is u n iq u e m a n u a l - ( w h i c h is b v t h e s a m e
p u b lis h e r o f th e R isk a n d In s u r a n c e M a n a g e
I n s t i t u t i o n s ) - takes
y o u s te p -b y -s te p th r o u g h every area o f R isk
m e n t G u id e F o r S a v in g s
M a n a g e m e n t p la n n in g - in s im p le term s, w ith
This article is adapted from remarks
made by Mr. Gilpatrick at the ABA’s
National Credit Conference in Atlanta
in March.
s p e c ific e x a m p le s . Y o u n e e d n 't b e an in su r
a n ce a gen t to u n d e rs ta n d it. Y e t every s ection
reveals new , p ro v e n w ays to r e d u c e y o u r risks,
losses a n d p r o b le m s a n d is co n s ta n tly kept up
to date.
THE RISK AND INSURANCE
MANAGEMENT GUIDE
C red it P o licy —B ro a d Issu es
Effective Historical Inform ation Base
•Complete Loose-Leaf, Tab-D ivided, Section Indexed
•Ten issues o f “ Risk Management News"
•Guide Updates For The First Year
Is Becoming M o re Im perative fo r Banks
By CHARLES H. PISTOR JR.
President
Republic N atio nal Bank
D a lla s
HERE is no question but that it
will becom e more imperative for
all banks, but especially for the larger
ones, to develop and have an effective
historical information base.
Commitments and the usage under
them will need to be defined by several
various cuts, including financial quality
o f the company, industry concentration,
regional locations, experience in tight
money times and experience in easier
money times, pricing and specific defi
nitions as to whether the commitments
are legally binding or those of a general
friendship nature.
Exactly how this information can be
used as a management tool, and how
soon, is unknown— and hence we may
be tempted to postpone its gathering
T
This article is adapted from remarks
made by Mr. Pistor at the ABA’s Na
tional Credit Conference in Atlanta in
March.
as an exercise in futility. But as the
credit appetites of our customers grow,
especially the Baa’s that may find it
harder to get financing except from the
commercial banking system, we will
have to be able to better anticipate the
potential demands on our loan accounts.
W hy?
First, our pricing, especially for back
up lines for less than the top com
panies, will continue as today— too
cheap and too uniform. More proper
pricing of bank services surely seems to
be the worn out phrase, but all in
dustries must constantly be evaluating
and changing price policies vis-a-vis
the value to the market. Look at the
telephone company and “ usage-sensi
tive” rates on your residential and cor
porate bills to cite but one major policy
change within a giant industry. W e
have no one to blame but ourselves if
we subordinate pricing and profits to
uniformed habit!
This year certainly gives us little en
couragement for a favorable environ
ment to take a firmer price line, but
ultimately, the banks that have thought
MID-CONTINENT BANKER for May 1, 1976
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
* 1 0 0 .° °
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STAYS UP-TO-DATE
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continuing service beyond the first year to keep your
guide current.
10-DAY TRIAL OFFER
Take 10 days to examine this vital manual at your
leisure. If you are not satisfied, simply return the guide at
no cost or obligation.
*
M id-C ontinent Banker
408 O liv e St.
T 5 S t.
L o u is, Mo. 63102
Please send me The Risk and Insurance Management
Guide for Bankers. The $100.00 initial price includes the
first ten issues o f “ Risk Management News" plus all
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51
through the standby line of credit issue
the most thoroughly will figure out
faster and better how to gain from the
customer for a valuable service ren
dered. Our beginning point is to do our
homework!
Second, combining empirical knowl
edge of commitments (and their usage)
and the experience on the outstanding
portfolio with proper pricing (synonym
for profitability) is the best way to an
swer the $64 question: Can we honor
our commitments?
Given a free market, the liquidity
issue is best answered and managed by
stability of sourcing.
There seems to be little doubt but
that commercial bank portfolios will
continue to lengthen, whether by an
nual lines regularly used and regularly
renewed, or by revolver-terms or term
loans. At the same time, it is going to
be more difficult to match maturities of
assets and liabilities, as, of course, the
big banks can’t do today.
What we can do is to match the
levels of assets and liabilities that re
spond to interest changes, so that our
profitability— and, hence, our financial
health— is maintained.
If my present premise is correct, that
“mismatching of maturities”— that is,
borrowing short and lending long— will
intensify for banking (in spite of Cor
porate Finance I ), then the challenge
to bank management is obviously to
maintain the integrity of its sourcing.
Shortened, more volatile business and
economic cycles effectively add cost,
because we always have “to have the
gun ready to fire,” so to speak, and
these pressures may well tempt us to
run away faster from industries report
ing troubles— back again to the impera
tive need to maintain the “ Mr. Clean”
image and the integrity of our sourc
ing. I hope we can resist this tempta
tion if it is merely “ herd philosophy.”
But, in thinking through and dealing
with these commitment and sourcing
issues, let’s remember well the ability
of our customers to pay. Corporate
profits are going to be up 20+% this
year. And let’s also remember well the
value of our commercial banking ser
vices.
If we don’t, then the resultant medi
ocre profit performance will properly
drive equity capital elsewhere and
make the saying of Roman antiquity
pertinent: “ The fault, dear Brutus, is
not in our stars, but in ourselves. . .
Banking’s record has in the past been
good. The future challenges and com-
C red it P olicy D ecisions
Loan Review M an N ow Ist-Class C itize n
As Emphasis Given to P o rtfo lio C ritique
By CHARLES J. KAN E
C h airm an & President
Third N ational Bank
N a shville
N TIL about two years ago, the
loan review officer was considered
necessary by most banks but was not
looked upon as being a first-class citi
zen. He was there; we reviewed his
reports; but we didn’t listen to him to
the degree we should have.
If we were on trial today, the evi
dence would weigh heavily against us.
Either we did not listen or, in many
cases, we did not have the proper loanreview procedures in operation at our
banks.
Most bankers will agree that fewer
workouts would be necessary if sounder
judgment is used and proper docu
mentation is at hand when a loan is
made.
Loans becom e lost because the loan
U
This article is adapted from remarks
made by Mr. Kane at the ABA’s Na
tional Credit Conference in Atlanta in
March.
C h arles J. Kane (r.), ch.. Third Nat'l, N ashville, sp eaks on the day-to-day decisions of credit
policy a t A B A N atio nal Credit Conference in A tlanta. Looking on a re M oderator H arry S. M eily,
vice ch., Security Pacific N at'l, Los Angeles (and then vice ch., A BA Com m ercial Lending Div.);
and Frank E. M cKinney Jr., ch., Am erican Fletcher N at'l, In dianapo lis.
52
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
plexities are tough for us, as they are
for our customers, and as they should
be within an enlarging, changing econ
omy. W e will continue banking’s good
record dependent upon our willingness
to work harder, tougher and smarter.
What banking needs is not a super
agency of regulators, but the right to
continue using its management skills
and dollar resources to work things out
within a reasonable atmosphere of pri
vacy— and to then be held accountable
by our boards and the marketplace! • *
officer didn’t get enough information on
which to make a reasonable credit judg
ment. Or he took a chance on a bor
rower who had too little stability. Or
he failed to document the loan
properly.
The type of loan review best suited
to a bank depends on several factors,
including the size o f the institution in
terms of personnel and assets as well
as the current quality of the loan port
folio.
Questions that should be asked in
clude the following:
• What is the function of loan re
view?
• What should be a loan review
department’s scope of operations?
• W ho should staff the loan review
department?
• Where should loan review be posi
tioned within the organization and to
whom should it report?
Loan review personnel, regardless of
the varying degrees of authority they
possess, must maintain objectivity in
determining the quality of a bank’s loan
portfolio. Because loan review should
be a staff function, the word “ author
ity” must be qualified and defined.
The procedure for handling and rat
ing loans at Third National is as fol
lows:
Loan review is a highly visible staff
function of foremost priority in the
overall administration of the bank. W e
have chosen to make it totally and com
pletely independent of our day-to-day
lending activities and this includes our
most senior lending people. Loan re
view is a separate department that is
independent of the banking division.
The head of the review area must have
independence and report to senior man
agement.
Thus, loan review personnel are free
to fully develop their criticisms. While
not an auditing function, per se, they
do act in a similar capacity and, there-
MID-CONTINENT BANKER for May 1, 1976
Move
TheFourth
to your
town.
It just stands to reason w e've probably got everything you'll ever need in
a correspondent bank. You simply decide how you w ant us to help — all at
once, or one service at a time.
W e're very easy to work with.
But you know that already — If you know Tom Potter, Joe Stout or Fred
Swinson. They'll be looking forward to seeing you at the convention.
Tom Potter
Joe Stout
Fred Swinson
A neighborhood bank
as big as Kansas itself.
TheFourth
FOURTH NATIONAL BANK &■TRUST CO./WICHITA, KANSAS 67202/ MEMBER FDIC
MID-CONTINENT BANKER for May 1, 1976
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
53
fore, the chips fall where they must
with a general disregard for rank and
position.
Our staff numbers six, which is ade
quate for a $600-million loan portfolio.
The department brings all credits of
$75,000 and over under a periodic
review that is detailed and compre
hensive.
W e employ a one-through-four rat
ing system.
Rating number 1 includes borrowers
with seasonal loans of highest quality
that we expect will be paid in full at
maturity or which could easily be re
financed or transferred, normally under
confirmed lines of credit. Loans in this
categoiy are unsecured and are seasonal
or short-term. Usually this rating is re
served for national firms. These loans
normally make up a relatively small
portion of the portfolio, in terms of the
number of borrowers.
Rating number 2 includes other
sound loans protected b y the borrow
ers’ net worth or collateral that can be
repaid according to terms or within a
reasonable time without adversely af
fecting the borrower. In general, loans
in this category are sound loans o f a
short-term or term nature, secured or
unsecured, made to local companies or
individuals. Term loans or revolving
credits to national firms are in this
category. The majority of loans receive
a “ 2” rating.
Rating number 3 includes loans con
sidered collectible, but, because of size
and composition of the borrowers’ as
sets or net worth, inadequate collateral
or other factors of an unfavorable na
ture, the terms of the loan may not be
met or the date of repayment is un
determinable at the moment.
Loans to companies that habitually
cannot effect seasonal payout; loans to
companies that are operating at a loss;
or loans to companies with other un
favorable operating trends are normally
rated in category 3. Loans are not
normally rated “ 3” just because it is
felt they should be followed more close
ly or reviewed more often than other
loans. Other factors must be considered
before a loan is rated “ 3.”
Rating number 4 takes in high-risk
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54
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Federal Reserve Bank of St. Louis
loans requiring careful servicing. Num
ber “ 4” loans are those where a loss
or a work-out situation is possible. Care
ful servicing is required to prevent or
reduce a possible loss.
W e feel our approach is highly ef
fective. For example, each week our
finance committee, made up of senior
management and rotating outside di
rectors, meets to consider new as well
as existing loans and lines of credit up
for annual review. The bulk of the
material in these presentations deals
with the essentials o f the credit. In
addition, any variance with loan agree
ments or with the intent of the original
loan proposition is highlighted. Miss
ing, stale-dated or defective documen
tation might well be noted.
At these meetings, we also go over
what we call a “ large-note report.” This
formal report details full and increased
renewals and loan reductions. Here
again, loan review may comment clear
ly and strongly on matters of incom
plete credit information, lack of com
pliance to reduction programs, unfavor
able developments or trends in the
company, documentation, etc.
As we are structured, superficial ex
planations b y lending officers to loan
review, whether oral or written, will
rarely, if ever, serve to satisfy criticism.
The questions of loan review are satis
fied when the proper documentation
is physically in-house or, in the case of
credit factors, the majority of the mem
bers of the loan or finance committees
agree and formally vote to waive or
forego a condition that might be nice
to have, but one we can live without—
in other words, a consensus of manage
ment. These decisions becom e part of
the record and the point raised by loan
review is then considered satisfied.
The following elements should be
present in any loan-review program:
• Independence and objectivity in
evaluation of the loan portfolio.
• Clear lines of communication.
• Personnel trained in credit analy
sis and familiar with the lending func
tion.
• Personnel with the ability to make
the program work.
• Support from all areas of manage
ment and the directors.
• Clearly defined reporting, reply
and follow-up procedures.
• W ell-defined guidelines, known to
all officers, clearly stating loan review’s
function and scope of operations.
With the liquidity of the banking
industry being tested now more than at
any time since the depression, loan
review procedures are becom ing more
comprehensive. Some fear that this
could lead to over-conservatism. I do
not feel it will. If handled correctly,
it will benefit management. * *
MID-CONTINENT BANKER for May 1, 1976
C re d it P o licy D ecisions
Factors A ffecting D ay-to-D ay Decisions
Include Loan Approval, Reserve Policies
By FRAN K E. M cKIN N EY JR.
C h airm an
A m erican Fletcher N ational Bank
In d ian ap o lis
OAN APPROVAL procedures, valu
ation reserve adequacy and credit
training procedures are important fac
tors among the day-to-day decisions
bankers must make.
In order to better understand loan
approval procedures, we must first focus
on organization— the key to implemen
tation, communication and control.
There are six main organizational
groups at American Fletcher, two of
which lend money— the corporate bank
ing group and the consumer banking
group. Four divisions under the cor
porate group lend money and there is
one division under the consumer group
that lends money, and that is through
the banking center (branch) system.
Under the staff support group, one of
the six main groups in the bank, there
exists the loan policy and operations di
vision, which is a staff function report
ing directly to executive management.
The head of that division is also chair
man of the loan committee.
The loan committee is more of a
policy-making committee than a creditapproval committee, although it serves
both functions on larger credits. M em
bers consist of group and division heads
as well as executive management.
To better understand lending limits,
the legal lending limit o f a bank must
be stated. Our legal lending limit is $12
million.
Every lending officer is assigned a
discretionary lending limit up to $500,000 (a little over 4% of our legal lend
ing limit) by the loan committee, upon
recommendation by group heads. These
authorities range from a small amount
($5,000 to $50,000 for a banking cen
ter officer) to $500,000 for a division
manager. Loans up to these amounts
are made without prior loan committee
approval. The committee, however,
reviews all credits from $100,000 to
$500,000. It also must approve— before
the loans are made— all credits in excess
of $500,000 and up to the legal limit.
Individual lending authorities are re
viewed, based on performance, every
90 days.
All loans in excess of $500,000 must
be reviewed and recommended for ap-
L
proval by the respective division head,
the group head and the chairman of
the loan committee before they are
placed on the weekly agenda of the
loan committee.
The loan committee meets every
W ednesday morning to review and set
lending policy and approve loans an d /
or lines of credit over $500,000. Be
tween meetings, there exists an emer
gency loan-approval system for loans in
excess of $500,000, as follows:
• For loans from $500,000 to $2.5
million— A lending officer, plus a di
vision head, plus a group head can ap
prove.
• For loans from $2.5 million to $5
million— A lending officer, plus five
members of the loan committee (which
must include two division heads and
the group head) can approve.
• For loans from $5 million to the
legal limit— All of the above, plus either
the bank’s chairman, vice chairman,
president or executive vice chairman in
charge of the lending group, can ap
prove.
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This article is adapted from remarks
made by Mr. McKinney at the ABA’s
National Credit Conference in Atlanta
in March.
MID-CONTINENT BANKER for May 1, 1976
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Federal Reserve Bank of St. Louis
55
of loan-approval procedures is how the
bank is organized. If properly orga
nized, given the operation of the bank,
those lending money should know the
system and where they fit in it. They
should know lending policy and what
is and what is not expected of them.
If properly organized and communica
tion is constantly in the forefront, the
lending officer will not be intimidated
by the system and will be free to make
prudent decisions and pursue planned
business development.
In determining the adequacy of the
bank’s valuation reserve, the following
policy is considered and performed at
American Fletcher:
• The adequacy of the valuation re
serve is viewed in light of past chargeoff experience.
• The percentage of the valuation
reserve to total loans outstanding
should at least be equal to, but planned
to exceed, the industry average for the
bank’s peer group, in our case, the $2to $5-billion banks.
• A formal analysis and review of
each significant non-performing credit
is made for the purpose of determining
an estimate of the possible risk exposure
on such credit. In determining the
amount of any risk exposure, many
sources are used, such as independent
appraisals on real estate projects, eco
nomic studies of areas where loans exist
and information prepared by our loan
review section concerning industiy
trends.
The above information is then re
viewed in detail by executive manage
ment and final conclusions are made as
to the amount of valuation reserve
needed to include reserves for normal
losses on consumer credit based on ex
perience and review. A cushion amount
is also determined and added to the re
serve.
This material is then furnished to our
outside auditors, who make their own
independent analysis and review of
such material, plus a review of other
loans to see that all significant ex
posures are covered.
A meeting is then held with the in
dependent auditors to discuss any dif
ferences, and final conclusions are
reached.
The key here is that we initiate and
perform the analytical and review func
tion and provide our opinion to the
auditors. W e then review their work
based on our system. This system is
only successful if the self-employed an
alytical methods are extremely realistic
and will stand the test of time.
Due to the experiences of the reces
sion, have we changed credit training
procedures? What are the important
areas of emphasis?
The few changes that were made
were not prompted by the recession,
56
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Federal Reserve Bank of St. Louis
but rather, occurred in the ordinary
course of development as our loan port
folio grew or broadened in scope.
The loan committee and corporate
group were reorganized in late 1975.
Originally, the loan committee chair
man was a line officer. It is our opinion
that this responsibility is a full-time
job and, accordingly, has been assigned
as a staff function.
The chairman of the loan committee
evaluates lending officer performance
and recommends the necessary training
programs, where needed.
Performance standards are created
for each officer, describing in detail the
performance expected. More detailed
delinquency reports are being required.
Division heads are required to report
on past-due loans each week at the loan
committee. Action and strategic plans
are required from each group, division
and department, outlining how loan ob
jectives are going to be met. * *
For B an ks U n d er $1 0 0 M illion:
Lending Policies Can Be Structured
To Enable Banks to A void Problem s
of loan port
folios, loan review systems and
problem credits and the determinants
of loan profitability for banks under
$100 million in assets were discussed
by a panel of three bankers at the
ABA’s National Credit Conference in
Atlanta in March.
Panelists included D. Bruce Adam
son, chairman and president, First Na
tional, Joplin, Mo.; Pat Moore, presi
dent, American State, Thomas, Okla.;
and Alford C. Sinclair, president, At
lantic National, Jacksonville, Fla.
Mr. Adamson said that spread man
agement and profitability are the names
of the game today. Rapid growth de
mands additional capital, which is diffi
cult to raise, and management at First
of Joplin has adjusted the bank’s lend
ing policies accordingly.
Each new loan must be justified in
its spread factor, he said. “ W e’ve gone
from high loan volume with low mark
up to low loan volume with high mark
up.’’
Consistency in earnings is the key to
success, Mr. Adamson continued, and
profitability is what regulators look for.
G ood earnings are the key to a sound
banking system for the U. S., and there
is much work to be done in the area of
increasing loan portfolio profitability.
He said that the basic determinants
of loan profitability are (1 ) knowing
costs, (2 ) maintaining spread and (3 )
collecting the loan at maturity. “ You
will have to admit that the last one is
probably the most important.”
Most bankers don’t know the cost of
their operations, he said, and they don’t
know how to use loan pricing formulas
effectively. Thus, they don’t have an
swers for customers who think they
deserve the prime rate on their loans.
“ W e make good by accident, not
design,” he said. If bankers can over
com e these deficiencies, they will be
able to increase their dividends.
Mr. Adamson outlined the following
steps to maximize loan profits:
A
d m in is t r a t io n
• Be sure the bank’s data processing
gives the average collective balance on
deferred deposits.
• Know costs— join the Fed s cost
analysis program.
• Establish an internal loan review
system that includes a grading system.
• Establish basic internal policy.
Know what rate you want to achieve
on capital funds and make it a practical
figure— no wishful thinking.
Then, design the system. Determine
the interest rate the loan should carry,
establish a loan review system. Know
what you want to achieve in the way
of profits.
Loan review, he said, should be a
continuing analysis. Deduct costs from
income to determine profit and see if
it agrees with the profit goal. If it
doesn’t, reset the interest rate at re
newal time.
Mr. Moore advised that a bank’s
directors should establish a bank’s loan
policy and it should be written. W hen
establishing the policy, consideration
should be given to the consumer and
a continual update of the policy should
be provided for.
Written parameters for credit allo
cation should be established and a
marketing emphasis necessary to con
sume the allocated funds should be
determined. For new types of loans in
a portfolio, know where to get answers
fast and establish early warning signs
so that problems with loans will be
readily recognized when they appear,
he said.
A constant analysis of the loan port
folio should be maintained, Mr. Moore
said, and it should be carried out ac
cording to the written loan policy and
acceptable regulatory procedures. It
should include direct verification.
“ Analyze your loan officers,” he ad
vised. “ Have them submit property
statements so you can determine their
level of living. Check up on loans
granted to personal friends or granted
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MID-CONTINENT BANKER for May 1, 1976
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Federal Reserve Bank of St. Louis
57
out of the bank’s trade area.”
In the area of insider loans and con
flicts of interest, Mr. Moore advised
adhering to the new procedures out
lined by the FDIC, issuing written
instructions to loan officers and di
rectors and holding meetings period
ically with directors and officers to
discuss procedures to avoid conflicts.
In the loan documentation area, he
advised that each loan folder include
the following information: Name and
address of borrower, interest rate, type
of loan, a section for comments and
flow of funds.
Financial information on the borrow
er should include financing statements,
cash-flow projections and annual sales
information.
Collateral documents should include
financing statements, security agree
ments, accounts receivable, inventory
lists and valuations, mortgages and
safekeeping receipts.
Supporting documents should in
clude insurance, warehouse receipts
and correspondence.
Loan limits should be established for
each loan officer according to his ability
and experience, Mr. Moore said, and a
policy should be formulated for loan
officers who encounter applications in
excess of their limits.
“ Each loan your officers place on the
books should be analyzed,” he said,
“ along with the ability of loan officers
to develop new business.”
It’s good to know how tough a loan
officer can be under trying conditions,
he said. Can the officer handle the situ
ation or will he need assistance? Im
mediate action in the case of a bad loan
can often save money for the bank.
Mr. Sinclair said loan review really
consists of three facets: technical re
view to ascertain correct documenta
tion, credit review to ascertain good
judgment and past-due review to make
certain loans are kept reasonably
current.
In a well-run bank, he said, the
technical review starts at the loan tell
er’s window. W hen a loan officer and
a customer walk up to the w indow to
complete the loan transaction, a good
loan teller will look carefully at the
note to be sure that it’s filled in cor
rectly, will use his or her training to
ascertain if the collateral documents
called for by the note are attached and
will quickly count stock certificates or
other documents to see if they appear
correct. This is done while the customer
is standing at the window.
Having passed inspection, the loan
documents should next be inspected
by the collateral clerk, who has the
responsibility of following up on auto
titles, insurance policies or other docu
ments that cannot be presented when
the loan is made.
58
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Federal Reserve Bank of St. Louis
The third phase of internal technical
review should be from the bank’s audi
tors, he said. At least once a year, the
auditing department should conduct a
full-scale examination of the loan port
folio. The primary purpose of this ex
amination is to look for technical ex
ceptions and past-due loans.
The bank should require written re
ports from each loan officer regarding
technical exceptions and it should be
understood that sloppy documentation
will not be tolerated.
Any bank near $100 million in de
posits should separate the collateralcontrol function from the loan-teller
function. This improves the loan-review
system and cuts down on opportunities
for embezzlement of collateral, Mr. Sin
clair said.
The task of reviewing credit judg
ment is somewhat more complex b e
cause credit judgment is so much more
subjective than documentation, he said.
“A loan is either properly documented
or it isn’t, but credit judgment comes
in infinite shades of gray.”
Mr. Sinclair described the credit re
view system at Nashville (T enn.) City
Bank, with which he was associated as
president prior to his joining Atlantic
National. The majority of the bank’s
lending officers were inexperienced, he
said.
“ The first thing we did was cut
lending authorities to the minimum
amount we could reasonably do busi
ness with. W e formed an officers’ loan
committee consisting of all officers who
had lending authority and we met first
thing every morning to consider every
loan that exceeded an officer’s au
thority.
“ This way, we could give reasonably
quick service; we could get the benefit
of group judgment; and the meetings
served as a training ground for lending
officers. It was no rubber-stamp com
mittee. Questions and reasonable dis
sent were encouraged.
“ As an added protective device, our
officers’ loan committee reviewed, postfacto, each new loan for more than
$10,000, regardless of whether the loan
was within the lending authority of the
officer who made it. This was a fairly
fast review, but each committee mem
ber was handed a copy of what we
called the ‘loan officer’s worksheet,’ pre
pared on each new loan or nonconforming renewal.
“ A fringe benefit was that our young
loan-review officer was an ex-officio
member of the committee. The presen
tation of loans, the discussion of them
and the enthusiasm or lack of it on
the part of committee members gave
the loan-review officer a lot more in
sight into each loan than if he had
merely seen a file that came across his
desk.
“ To help the young loan-review offi
cer with all the small loans, we de
veloped our own credit scoring sheet,
which, incidentally, we encouraged our
less-experienced lending officers to use
as a tool. In our loan-review system we
had one of the persons in our credit
department score, post-facto, every per
sonal loan of less than $10,000. This
included both time and installment
loans, since we had abolished our in
stallment loan department and had
every lending officer in our Main Office
and nine branch offices make whatever
kind of loan best suited the customer’s
needs, regardless o f whether it was re
paid in monthly installments or on a
90-day basis.”
Mr. Sinclair said each personal loan
of less than $10,000 was scored and
the scoring served three purposes:
• It cut the loan-review officer’s
workload to a manageable level, since
he didn’t need to look at those that
scored in the upper range.
• It gave him a running start on
the loans he did review because it
told him something useful about the
borrower.
• Since the bank kept a tally on
the number and percentage of marginal
and submarginal personal loans made
by each officer, it gave the loan review
officer an opportunity to meet regularly
with the loan officer’s supervisors to
discuss the loan officer’s performance.
“ You have to be careful with scoring
systems,” Mr. Sinclair said. “ First, to
comply with current legislation, and,
second, not to rely on them too heavily.
Yet, properly used, they can be of great
help.
“ The score sheet we used was
weighted in an unscientific, but rea
sonably accurate, fashion to measure
the stability of the borrower. That’s
about all a scoring sheet can measure.
But stability is important. Borrowers
who have lived in the same location
for several years, w ho have worked at
the same job and who score well on
the other criteria that measure stability
are much more likely to repay their
loans than those without stability.
“ You cannot overlook a good system
of reviewing past-due loans. Just as
with any other account receivable, their
real value drops rapidly as they becom e
more and more past due.
“ I like an automated loan system
that divides past-due time loans into
two categories— those less than seven
days past due and those seven days
or more past due.
“ W hoever is doing the reviewing
should not concern himself with loans
less than a week past due. Those are
the worry of the loan officers and the
loan officers should be working their
past dues and trying to keep them off
the seven-day list. Properly handled,
(Continued on page 66)
MID-CONTINENT BANKER for May 1, 1976
“W ith the hirst as a partner,
we’ve succeeded as we’ve
helped Jim Boone’s farm
implement business succeed.”
'
f
„
’
, ... -
The First National Bank
o f Quinter, Kansas is a true
success story. A correspondent
bank relationship has helped it
develop and grow with an
important new customer.
In 1965, Robert Bugbee,
president p£ the bank, called
* . upon th£ First National Bank
o f Kansas CJity to participate in a
, major line o f credit for Mr. Jim
Boone, founder o f Ideal
Industries in Quinter,
manufacturer and distributor
o f specialized farm equipment.
The First National Bank
o f Kansas City extended credit
used for seasonal working
capital and in recent years for
major business expansion and
i distribution o f Jim Boone’s own
invention, the Flex-King stubble
mulch plow.
Credit assistance and the
«additional help o f business
rtise o f fhe people in our
espondept Department like
e Dudley have been
t in the success o f First
Bank o f Quinter. ~
Ancfas Jim Boone’s small
husband-and-wife, company has
expanded to a thriving
corporation, First National
BapJCof Quinter has grown with
important new business.
G ill the professional staff o f
the Correspondent Department
5f the First National Bank of
j . Kansas City. We caahelp your
^bank with the development of
¿H dew o^ijiess.
*
.
*‘,~KOijr correspondent tradition
nalbeen built on helping banks
•; likeithe“Tirst National of
C;rC^|inter. ,
.
Why not put bur strong
■1■ »■ Fraflition o f excellence to work
f your success.
j yi nj
Georg«?£)(j d1ey/r’l
t'Btigbee, T t,
JWt^pone, Idèa! .fra
■;• 2
iiiH y M
>":h.
Yxar success is our tradition.
F irs t
.
N a tip
tio n a l
Bank
Of KANSAS CITY.
MISSOURI
An Affiliate of First National
Charter Corporation
MID-CONTINENT BANKER for May 1, 1976
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Federal Reserve Bank of St. Louis
Member FD IC
59
J. D. Acklin, pres., Louisiana Bankers A ssn.,
and ch. & pres.. Planters Bank, H aynesville.
Richard J. Pfleging, pres., Missouri
Bankers A ssn., and pres., Bank of St.
Ann.
J. R. A yres, pres., K an sas Bankers Assn.,
and pres., Citizens State, M iltonvale.
The ‘Problem-Bank’ Situation
OAN LOSSES, problem banks, REITs— these are much in the
news lately and also the subject of many bankers’ conversations.
Therefore, as convention time approaches for state bankers associa
tions, M i d - C o n t i n e n t B a n k e r editors think it appropriate to solicit
comments on the above subjects from presidents of the various as
sociations and publish them in the magazine’s two convention issues.
Each of the two May convention issues will feature remarks by a
number of chief executives of the state banker associations in the
Mid-Continent area. These bankers are in the position to know the
loan-loss situation in their respective states due to their long associ
ation with banking affairs in their areas.
This issue features contributions from the presidents of the follow
ing associations: Louisiana, Kansas, Texas, Arkansas, Oklahoma and
Missouri. In the May 15th issue, there will be comments from the
presidents of these associations: Alabama, Illinois, Indiana, Mississippi,
New Mexico, Tennessee and Association for Modern Banking in Illi
nois.
L
J. D . ACKLIN, president, Louisiana
Bankers Association, and chairman
and
president,
Planters
Bank,
Haynesville:
N R ECEN T YEARS, banks in this
country have been encouraged to
overextend themselves by a liberal Con
gress, which somehow has gotten the
mistaken impression that the Constitu
tion guarantees every citizen the right
to an electric dishwasher and two cars
in the garage. Whenever Congress en
courages bankers to make unsound in
vestments in the interest of stimulating
the economy, you can expect trouble.
The lesson bankers should have
learned over the past year is that they
should stick to their knitting. They
should stick to the business they have
been trained for instead of expanding
into businesses where they have little
or no expertise.
Bankers in this country need to wor
ry less about asset growth and more
about profits. If the guy across the
I
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Federal Reserve Bank of St. Louis
street starts building branches like
crazy that you know he can’t pay for,
you don’t try to impress your directors
by building more than he does.
I really think bankers need to be
come less afraid of being labeled as
conservatives. Banking is a conserva
tive business. It has to be that way
because w e’re dealing with other peo
ple’s money that’s been placed with us
for safekeeping. W e can’t make the
kind of investments that people in other
types of business make; they’re just
too risky for us.
I don’t mean we should not be ready
and eager to accept the challenges that
the new electronic banking will bring
to us, or that we should not be on the
lookout constantly for new and better
ways to serve our customers and in
crease our profits. The fact is, however,
that banking is not a get-rich-quick
business. There aren’t any shortcuts to
success in banking.
N ow there’s talk about strengthening
our regulatory agencies because of the
problem that some banks have had
because they moved too quickly into
REITs and other things where they
had no business. But there’s nothing
wrong with our regulatory system. The
present system has just seen us safely
through the greatest financial crisis we
have had since the depression without
the first penny of insured deposits be
ing lost.
The problem, in my opinion, is just
that the liberals in Congress are con
vinced that the solution to all problems
is bigger government. If these totally
uninformed people are going to con
tinue to meddle in the banking busi
ness, w e’re just going to have to try
to educate them in economics. W e’re
going to have to have a larger, stronger
lobby in Congress that can get the
message to them.
For example, who but a person who
knows nothing about banking or eco
nomics would propose something as ri
diculous as credit allocation. The pres
ent movement to politicize the regula
tory authorities is nothing more than
a subterfuge aimed at installing credit
allocation.
In my opinion, the regulators have
done a good job over the past 40 years.
If these agencies need to be strength
ened, we certainly can achieve this
through administrative change without
junking the entire system.
Some banks may be guilty of moving
into areas where they had no business
over the past several years, and some
regulators may be guilty of allowing
this to happen, but the liberals in Con
gress would place a bank examiner at
the elbow of every loan officer to tell
him that A is a “ socially desirable” loan
and B is not. W e certainly don’t need
that. * •
MID-CONTINENT BANKER for May 1, 1976
Dorman F. Bushong, pres., A rk a n sa s
Bankers A ssn., and pres., Farm ers &
M erchants, Rogers.
J. B. W heeler (r.), pres., Texas Bankers Assn., and pres., H ale
County State, P lain vie w . Mr. W heeler is show n at 1975 convention receiving b adg e of office from outgoing TBA Pres.
Gene E d w ard s, ch. & pres., First N at'l, A m arillo.
Tracy Kelly, pres., O klahom a
Bankers A ssn ., and ch. & pres.,
Am erican N at'l, Bristow.
ow Do W e Avoid a Repeat?
J. R. AYRES, president, Kansas Rankers
Association, and president, Citizens
State, Miltonvale:
ENERALLY, the banking industry
is strong, vibrant and responsive
to the public needs and capable of of
fering valuable and productive services
to the communities and territories
served. It will emerge from the ex
periences of the past few years more
capable of meeting the challenges of
the future.
For a long period of years, the U. S.
economy experienced continued im
provement and growth. There emerged
from this period the theory that, in
case of adversity, governmental inter
vention in the economy with stimuli to
prevent deep decline was generally ac
ceptable. Industry managements were
indoctrinated and oriented to continual
expansion and growth and manage
ments were measured and rated by
their growth performance.
Emphasis was placed on expanding
the economy with no thought for re
sulting inflationary and recessionary
conditions. It was a new experience
and the problems induced by the re
sulting condition were not readily dis
cernible by industry, but are now evi
dent in the bankruptcies of new and
old businesses.
The banking industry was no dif
ferent from other industries. The mea
surement of management performance
was expressed in terms of expansion
and growth. The rules of prudence, in
some instances, were disregarded and
substituted for a growth and expansion
theory. This phenomena was particular
ly observed in regard to investment and
loan portfolios.
A large sector of the management
G
teams of industry, as well as financial
institutions, had never experienced a
period of adverse economic climate
and was not prepared to meet the
challenges and problems created by in
flation and recession operating at the
same time; deterioration of the general
business climate, creating the problems
of unemployment; and failures of busi
nesses, with the decline of work op
portunities. Financial institutions faced
liquidation of their investment port
folios to meet public demands, and, in
the case of forced liquidation of invest
ment portfolios, a decline in asset val
ue occurred that resulted in the de
terioration of liquidity positions, which
were most important to financial insti
tutions, particularly banks.
Kansas— being a diversified agricul
tural state— generally escaped many of
the serious setbacks familiar to some of
the other sections of the country and,
generally, the banks of the state ad
hered to the rules of prudence in ex
panding their investment portfolios as
well as maintaining secondary reserves
to meet the challenges o f adversity so
they would not be exposed to the many
problems of liquidity.
The sector o f the economy most ad
versely affected was the livestock in
dustry. Substantial losses were in-
ON THE C O V ER : Association presidents are
(top row , from I.) Richard J. Pfleging, M issouri;
J. D. Acklin Jr., Louisiana; Dorman Bushong,
A rk a n sa s. Second row : J. B. W heeler, Texas;
Tracy Kelly, O klahom a; J. R. A yres, K an sas.
Third row : W. E. H ow ard Jr., M ississippi; W ayne
Stew art, N ew M exico; C. L. Griffis, In d ia n a ;
H orace W. Broom, A la b a m a . Bottom row : Jack
O. W eatherford, Tennessee; Arthur F. Busboom,
Illinois; Lester A. K assing, A ssociation for
Modern Banking in Illinois.
MID-CONTINENT BANKER for May 1, 1976
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Federal Reserve Bank of St. Louis
curred but, fortunately, in general, loss
es were absorbed by adequate capital
structures, as these were not com pound
ed by overexpansion and overexten
sions of credit.
Banking is a risk business and, as
such, losses are to be expected. Mea
surements of management should be
changed to de-emphasize overexpansion
and growth and past experiences should
signal a return to more prudent invest
ment programs.
Also, regulatory authorities should
be more restrained in granting permis
sion for expansion into high-risk opera
tions. * *
J.
B. W H E ELE R, president, Texas
Bankers Association, and president,
Hale County State, Plainview;
ORTUN ATELY, Texas has not suf
fered as much from the current
recession as have other sections of the
country, nor have our banks experi
enced the large loan losses that banks
in other states have been reporting. I’ll
qualify that by saying that banks in
Houston and a few of the other big
cities in Texas have had some loan
losses, but, again, not to the same
extent as banks in the rest of the
country, because of real-estate loans.
Because business generally has con
tinued to be good here, I would say
that the state’s own economy has been
the best deterrent to the recession.
Part of our healthy economy is due to
the fact that unemployment has not
been as pronounced in Texas as it has
in other areas.
The loan losses that occurred last
year resulted primarily from the de
pressed real estate and construction
industries. Milwaukee and Chattanooga
F
61
come to mind as two of the areas that
really suffered. A bank even failed in
Chattanooga, and one reason was realestate loans.
A bank should never put too much
of its money into non-income-producing
assets such as real estate when inflation
becomes rampant. W hen real estate
stops moving, banks with a lot of their
money tied up in it are in trouble. The
REITs (real estate investment trusts)
are a prime example of problems
plaguing large banks.
A bank can avoid tremendous loan
losses in the future by being more
careful about taking appraisals on real
estate geared to a given economy that
causes equity to disappear. That is,
be sure that somebody’s money besides
the bank’s also is in the venture.
I certainly don’t agree with those
congressmen who are blaming Com p
troller James Smith for the so-called
“ problem banks” that have been in the
news lately. The best regulatory au
thorities in the world can’t prevent
bankers from making mistakes. They
can provide guidelines for bankers, but
it all comes down to the man making
the loan. He must study each situation
and then decide whether to grant the
loan and, at the same time, protect the
bank’s investment. A bank examiner
can’t stand at his side and give advice.
The same holds true for state regu
latory authorities. Here in Texas, the
national and state bank examiners each
have about 600 to 700 banks to ex
amine. They can’t possibly be available
to every bank when a questionable loan
situation develops.
Neither should holding companies
be scapegoats for problem banks. In
fact, I’ve seen this happen at various
times: A bank that gets into serious
trouble, may, in fact, be in danger of
failing. However, a holding company
steps in, buys the bank and pumps ad
ditional capital into it and provides ad
ditional management for it. As a result,
the bank is saved. Thus, its depositors
don’t lose their money and the com
munity keeps its bank. This is especial
ly beneficial when a town has only the
one bank. It’s equally beneficial in cities
with more than one bank.
In defending HCs, I want to em
phasize that our bank is independent;
it does not belong to a holding com
pany, and we have no intention of sell
ing to one. Neither does it belong to
the Fed.
I guess what I’ve really been trying
to say in this article is that bankers
must use old-fashioned common sense
when making loans and not submit to
pressures nor take advice from any
person, persons or groups on real-estate
loans during periods of double-digit in
flation! * *
62
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RICH ARD J. PFLEGING, president,
Missouri Bankers Association, and
president, Bank o f St. Ann:
HAVE not found that banks in Mis
souri have experienced extraordi
nary losses compared to other parts of
the country. True, the economic re
cession brought about serious unem
ployment that was reflected in increased
delinquencies throughout the state and
the nation, but the rate of impact on
different parts of the state varied and
the overall quality of the loan port
folio was such that Missouri banks
were generally quite able to weather
this situation exceedingly well.
O f course, those loans covered by
government-backed insurance or guar
antees that came under forebearance
directives contribute to overall delin
quency totals.
All things considered, Missouri banks
are in sound condition. Few, if any,
went overboard in real estate invest
ment trusts, condominiums and other
speculative real estate financing to the
extent that was done by banks in Flor
ida, Georgia, Tennessee and some other
areas.
It is ironic that, at the very time
M id -C o n t in e n t
B a n k e r is soliciting
banker opinions on the problems that
have arisen in loans, and principally
real estate lending, the Congress is con
sidering the Financial Reform A ct of
1976. That bill, among other things,
proposes (1 ) to channel more de
positor funds into the real estate area,
(2) to create minimum totals of in
volvement in that area in order to qual
ify for higher interest ceilings on de-
I
" M issouri banks are
stro n g a n d h a v e w e a th e re d
th e recessio n w e ll. The y w ill
be stro n g e r a n d w ill fa re
b e tte r th e n e x t tim e o n ly if
b a n k e rs in v o lv e th e m se lv e s
in m a n a g in g th e ch a n g es
th a t w ill com e a b o u t, ra th e r
than a ccep tin g th em a p a
th e tic a lly ."
posits and (3 ) to authorize the Federal
Home Loan Bank Board to sell debt
obligations to further flood that market
with funds at any time it deems as
sistance is needed. At no time does the
bill address itself to problems in the
housing industry other than the avail
ability and cost of money.
Recent figures released by the Na
tional Association of Home Builders
stated that, while disposable income
rose 183% in the 20 years ending in
1975, real estate taxes soared 341%, in
surance 351%, maintenance and repairs
269% and utilities 199%. In the same
period, mortgage interest rose from
4.8% to 9%, an increase of only 87.5%.
On top of these figures, available credit
for real estate loans was at an all-time
high at year-end 1975.
If the housing losses that some banks
throughout the country have expe
rienced have taught us nothing else,
they have shown us that something is
wrong with the housing industry be
sides fund availability.
I am not at all confident that I can
predict what will keep the loan-loss
situation from recurring or what gov
ernment at any level can do to prevent
loan losses. Supervisory authorities can
actually do little in the way of formu
lating policies to eliminate risks. If they
could, they would not be supervisors
but, rather, grantors of credit.
Certainly, the heaviest losses would
have appeared in larger banks or HC
situations, but that does not necessarily
point the finger of guilt at such a struc
ture. Large projects eventually require
larger loans, which then create larger
risks. Magnified across the whole coun
try, these risks came tumbling down
with layoffs brought on by a recession
that was publicly predicted three years
ago.
Perhaps I oversimplify the picture,
but I feel there are two causes to any
p r o b le m — lack of knowledge and
apathy. W e soon forgot the real estate
losses of the thirties. H ow long will it
take us to forget those o f the seventies?
The only time a banker should feel
he knows enough is after he has retired
from all participation in banking. Also,
there is no time when it is appropriate
for a banker to “ let George do it.” Be
cause of such attitudes, because of lack
of deep involvement in what our gov
ernment has been doing to our econ
omy (and because o f such nonaction
today, the economy that our children
will be living under tom orrow), we
have suffered and are still involved in,
to a lesser degree, not only a terrible
inflation and a costly recession, but, at
one point, both together.
W e can easily gauge the losses of
imprudent lending and then groan
when government imposes regulations
on us to ostensibly keep such events
from recurring again. W hy can’t we
compute and publish for all to see the
magnitude of the economic losses
brought upon the country by poor
judgment on the part of the govern
ment?
Bankers have made mistakes that
have resulted in loan losses. Some have
been serious enough to close banks,
but nothing has been worse than the
bankers who do not speak out to elect-
>1ID-CONTINENT BANKER for May 1, 1976
ed officials about their responsibility to
keep our country’s finances in order.
Missouri banks are strong and have
weathered the recession well. They will
be stronger and will fare better the next
time only if bankers involve themselves
in managing the changes that will come
about, rather than accepting them
apathetically. * *
DORMAN F. BUSHONG, president,
Arkansas Bankers Association, and
president, Farmers & Merchants
Bank, Rogers:
ECEN TLY I was dismayed to hear
a speaker say that the premise that
adequate capital accounts for commer
cial banks are a “ safety cushion” for
depositors is false. Nothing could be
further from the truth. To the contrary,
it has been clearly demonstrated by the
banking industry during the recent re
cession (w hich has been called the
most severe since W orld W ar I I ), that
its capital accounts can absorb the
shock of unexpected asset deterioration
and retain its viability to supply the
legitimate credit needs of both the pri
vate and public sectors.
Except for a few isolated cases, no
depositor’s funds were ever in jeopardy
(it has been many years since a com
mercial bank depositor has lost a single
pen ny), and, as a matter of fact, most
banks were able to absorb their losses
and still produce a modest profit for
their shareholders.
At this point, we must admit that the
problem was not as great as the news
media led the public to believe. Bank
failures were few when viewed in the
proper perspective that there are more
than 14,500 banks in this country. The
highly publicized accounts o f the U. S.
National Bank of San Diego and the
Franklin National Bank of N ew York
failures were classic examples of drama
tization rather than reporting. An indepth journalistic approach would have
included that the alleged defalcation
causing one failure and the alleged
“ maverick” managerial practice causing
the other were isolated cases, far re
m oved from the norm in the industry.
If I sound like a Don Quixote fight
ing a non-existent windmill, let me
hasten to add that there was a prob
lem— a real problem— of liquidity in
many, many banks during the recession.
This same spectre affected our indus
trial and commercial customers, turn
ing previously “ sound” loans into “ sour”
loans almost overnight. Real estate in
vestment trusts were the nemesis of
some unwary bankers; while heavy in
vestments in municipal bonds, which
suddenly and unexpectedly lost their
favorable credit ratings, created addi
tional headaches. In the midst o f the
R
recession, the heads of the regulatory
agencies implored bankers to supply the
necessary credit to maintain a viable
economy. Apparently they forgot to im
part this message to their field examin
ers, who stringently assessed classifica
tion for “ slow” loans, creating more
charge offs against reserves and capital
accounts. T o their credit, most banks
were able to cope with these problems,
absorb the losses and yet actively sup
port the economic recovery with the
necessary flow of funds.
Apparently the worst is behind us, at
least for the moment. The FDIC cur
rently lists only slightly over 300 banks
on its problem list and less than 100
on its critical list. In retrospect, it can
be presumed that most bankers will be
come a bit more cautious— less tempted
to lend funds for speculative ventures;
less prone to accept the reports of the
bond-rating agencies; and willing to
sacrifice some earnings for the sake of
liquidity.
But danger far greater than recent
experience lies ahead, danger that ap
pears to be almost beyond the control
of bankers themselves. The danger of
erosion of reserves and capital accounts
through forced reductions of earnings,
to the point of inability to absorb un
expected losses, is apparent and real.
Bankers are fully aware of the situation
and are desperately trying to prevent
it from happening. Unless the consumer
(both depositor and borrower) soon
realizes how detrimental the end re
sult will be for him and sets up a hue
and cry to protect his interests, it will
be an uphill battle.
At the same time that the Internal
Revenue Service seems to be trying to
eliminate all reserves for loan losses,
self-serving politicians at the national
level, who obviously place reelection
ahead of everything else, are trying to
sell the consumer the old “ free lunch”
line. By this I mean the free lunch of
interest on demand deposits and com
petitive bidding for time and savings
deposits; which will result in higher
loan interest rates, especially for the
consumer; all to be passed on to the
more affluent who have money to de
posit. I also refer to the free lunch of
making banking more competitive by
permitting easy entry into the field by
other financial institutions (for cheaper
services) without regard to capital re
quirements, which will result in elim
ination of the capital safety cushion
and perhaps the destruction of deposit
insurance (a complete disregard for the
depositors’ safety).
Yes, the danger is real. However,
there is hope. The consumer knows
there is no free lunch and may becom e
resentful of politicians who think he is
stupid. Then his voice will be heard in
Washington. * •
MID-CONTINENT BANKER for May 1, 1976
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TRACY KELLY, president, Oklahoma
Bankers Association, and chairman
and president, American National,
Bristow:
XCEPT for a few banks, loan losses
in Oklahoma have been minimal.
This can be attributed to a strong and
stable resource base consisting of agri
culture and energy.
Last year, substantial losses would
have occurred in cattle loan portfolios
if it had not been for the FH A Emer
gency Livestock Program. This pro
gram has been used extensively by
banks with customers who were caught
by the precipitous drop in the market.
These cattle customers will be sev
eral years in recouping their losses, but
Oklahoma banks did not sustain abnor
mally large losses in this area because
of their margins and their ability to
shore up their collateral positions with
second mortgages on land and the
FHA Emergency Livestock Program.
Oklahoma banking is a barometer of
the state’s economy, which is healthy
and viable. The most devastating con
dition confronting Oklahoma banks is
the malady that plagues the entire
country— inflation. The rampant ero
sion of the purchasing power o f the
dollar is unconscionable. Bankers need
to educate their constituencies toward
fiscal responsibility in government. * *
E
W e a re p re s e n tly
c o m p ilin g in fo rm atio n
for our n ew p a m p h le t
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MARKET DATA &
CORRELATIONS FOR
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City__________ State________ Zip.
63
State Regulators Give Loan-Loss Views
Bankers Must Solve Ills
Early Warning System
Sound Bank Management,
W ith Encouragement
Developed in Illinois
Not Overregulation,
From Regulatory Agencies
To Detect Problem Loans
Key to Loss Prevention
By W ILLIAM R. KOSTM AN
C om m issioner of Banking
State of M issouri
Jefferson City
By RICHARD K. LIGNOUL
C om m issioner of Banks
State of Illinois
Springfield
By HERBERT H. HUGHES
C om m issioner of Banking
State of N ew Mexico
Santa Fe
I
URING TH E PAST few years,
bankers, because of undue pres
sure from directors and stockholders for
continued dividends, ignored basic
credit p r in c ip l e s
and placed em
phasis on growth
of assets with little
regard for quality.
This resulted in
m a r g in a l lo a n s ,
higher yields and
less regard to risk.
The lenders, be
cause o f s te a d y
loan demands and
inflation, expected the continued boom
and inflation to retire these debts. In
some cases, the bankers were too close
to their borrowers and ignored credit
principles usually applied to all others;
in other cases, the decline in the quality
of loans had nothing to do with any
economic conditions. Unqualified man
agement simply made bad loans.
A lack of director-interest in some
banks, particularly as to the quality of
loans, permitted active management to
ignore the simple rules of credit analy
sis. Lack of credit information, investi
gation, repayment programs, documen
tation and poor credit administration
resulted in classified loans. W hen these
classifications were permitted for a time
without corrective programs to remedy
them, deterioration caused charge-offs.
The responsibility for maintaining
high loan and investment standards is
vested, of course, in the board. When
these responsibilities are ignored, active
management assumes authority without
the necessary guidelines and drifts
much like a rudderless vessel. The im
portance of periodic loan review and
policy adjustments, particularly during
a period of economic downturn, can
never be over stressed.
Then came the recession. General
economic conditions, unemployment
and operating deficits of many busi
nesses contributed to the deterioration
T IS IM PORTAN T that regulation of
loan activity in banks be reassessed,
but the hard evidence does not suggest
that from an overall regulatory stand
point the problem
of loan losses is so
s e r io u s and w ide
spread as to call for
extreme overregu
lation.
W hat w e need
now are regulatory
s o l u t i o n s that re
duce losses without
s u f f o c a t i n g our
credit system and
the ability of banks to serve the public
interest.
An ounce of prevention is worth a
pound of cure. The ultimate key to pre
vention of bank loan losses is manage
ment— its total commitment to a sound,
no-exception loan policy and a no-non
sense policy of prompt, continuous
monitoring of potential and actual prob
lem loans. Regulators can lend a hand
to management at various points, but
should not get directly into the busi
ness of banking and the internal man
agement of bank loans. The responsi
bility of regulators is to ensure that
bank management has formulated sound
loan policies, is committed to these
policies, is enforcing these policies with
out favoritism and is always aware of
the critical relationship between large
loan losses and bank problems.
There are a number of specific ways
regulators can fulfill this important re
sponsibility. I will list only a few to
which we are giving attention.
• W e are sharply increasing our sur
veillance of self-dealing and inter-fam
ily concentration of credit within indi
vidual banks and multibank groups. W e
are tightening enforcement of arm’s
length principles and formal loan pol
icies where we see such practices oc
curring.
• W e are encouraging our examiners
to search for potential, as well as actual,
problem loans; and we are emphasizing
proper loan documentation and updat-
T IS MY belief that there has been
too much publicity concerning prob
lem loans and problem banks. The cur
rent difficulties of the banking industry
and those of its re
cent past will not
be cured by airing
them in the media.
Rather, I b e li e v e
the bankers them
selves are the only
ones who can solve
their problems. In
some c a s e s , they
must be e n c o u r
aged to do so by
aggressive regulatory response.
Banking is still a private business
enterprise and, as such, is also a risk
enterprise. Accordingly, a banker who
doesn’t have some difficult loans in his
portfolio probably is not serving his
community to the fullest. The function
of a regulatory agency is to keep those
risks within reasonable bounds and to
ensure that the banks operate within
the confines of the applicable statutes
and sound and prudent banking prac
tices. However, it is my firm conviction
that anything less than a complete com
mitment on the part of a regulator to
use whatever means are available to
him (within governing statutes) in
problem situations will definitely re
sult in bank failures.
The medicine which bankers must
always take when the examiners dis
cover uncollectible loans in the note
case is that of charging them off. It is
at this point that others, who may not
be involved in the lending or manage
ment functions of the bank, i.e., the
shareholders, have a bitter pill to swal
low in the form of recapitalization.
It is clear that the statutory and dis
cretionary powers of the bank regulator
provide ample tools to cope with the
banking problems in Missouri. Where
necessary, we have in the past and will
continue to take appropriate action to
require additional capital, as well as
other action justified by the circum
stances. # *
64
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D
(C on tin u ed on page 66)
I
MID-CONTINENT BANKER for May 1, 1976
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BAN K of A M ERICA
C o r r e s p o n d e n t B a n k S e r v ic e
in g o f loa n files.
• W e are co n tin u in g to m o n ito r
p r o b le m loa ns, and m o re im p orta n tly ,
th e attitu d e a n d resp on se o f b a n k m a n
a g e m e n t to th ese loans.
• W e are n o t p rocra stin a tin g — as
b u re a u cra ts are te m p te d to d o — w h e n
w e u n c o v e r serious loa n p r o b le m s re
q u ir in g im m e d ia te an d drastic c o r r e c
tiv e a ction .
• W e are fo r c in g m a n a g e m e n t to
ca re fu lly e v a lu a te its role as ba n k s in
crea se th e s c o p e o f th eir a ctiv ity in real
estate, co n s tru ctio n , da ta p roces sin g ,
sm all loa n s a n d oth er areas. O u r c o n
ce rn is that b a n k s m ain tain th eir fu n d a
m en ta l ro le an d n ot b e c o m e s e c o n d class real estate, con s tru ctio n , or data
p r o ce s s in g firms.
O f co u rse , w e ca n n o t d o as g o o d a
jo b in som e o f th ese areas as w e w o u ld
like. A s b a n k in g b e c o m e s m ore c o m
p le x , e x a m in a tion o f banks b e c o m e s
m o r e c o m p le x a n d req u ires m o re e x
am iners an d grea ter expertise. T h e
m o n e y n e e d e d is n o t alw a ys ava ila b le,
so w e d o th e b e s t w e ca n w ith w h a t
w e h ave. W e d o n e e d s u p p o rt to im
p r o v e ou r re g u la to ry staffs, b u t n o t so
m u c h that w e re gu la te all th e fr e e e n
terp rise o u t o f th e system . • •
Commissioner Lignoul
(C on tin u ed from page 64)
o f lo a n p o rtfo lio s . M a rgin a l loa ns w e re
th e first to su rfa ce. T h e rece s sio n has
b r o u g h t to lig h t n o t o n ly m a rgin al
loa ns, b u t u n w is e in vestm en ts that
ca u s e d o r w ill resu lt in ch a rg e-offs.
T h e s e losses, in m o s t in stan ces, ca n b e
c o v e r e d b y profits a n d reserves w ith
o u t im p a irin g ca p ita l. T h e r e d u c e d
profits, o f cou rse, w ill result in d e
crea sed or— in so m e ba n k s— n o d iv i
d e n d p a ym e n ts. In a n a ly zin g losses e x
p e r ie n c e d b y so m e ba nks, w e fo u n d
th at m a n y loa ns w e re n ot m a d e d u rin g
th e e c o n o m ic d o w n tu rn b u t w e re th e
d ir e c t c o n s e q u e n c e o f u n q u a lifie d m a n
a g e m e n t m a k in g loans that w e re n e v e r
b a n k q u a lity .
S u p e rv iso ry a u th orities h a v e alw ays
r e c o m m e n d e d th e e sta b lish m en t an d
e n fo rc e m e n t o f firm loa n a n d in vest
m en t p rogra m s, w ith th e d irectora te
p e r io d ic a lly r e v ie w in g th ese p r o ce d u r e s .
In c o n n e c tio n w ith th ese p rogra m s
w e re su g gestion s a n d reco m m e n d a tio n s
th at banks serv ice their o w n areas an d
refra in fro m seek in g oth er loa ns or d e
posits fr o m o u tsid e th eir trad e areas.
R eg u la to rs ca n c o u n se l a n d e n co u ra g e
c a r e fu l an d rea son ed cre d it exten sion s,
b u t n e v e r m a k e th e a ctu a l c re d it ju d g
m en ts. W e ca n an d w ill assist w ith sys
tem s a n d p r o ce d u r e s , b u t this can n ever
b e su b stitu ted fo r b a n k er ju d g m e n t.
T h e co m m issio n e r’ s office in Illinois
w a s w e ll a w a re that b a n k su p ervision
a n d ex a m in a tion p ra ctice s h a d c h a n g e d
little o v e r th e years, d e s p ite th e c o n
tin u ed ch a n g es w ith in th e in du stry. A
f e w years a g o , this a g e n cy in itia ted a
m u ltifa c e te d a p p ro a ch to im p ro v e ex
am in ation e ffectiv en es s an d e fficien cy .
T h e B a n k M a n a g e m e n t E v a lu a tion S ys
te m (B M E S ) w as d e s ig n e d as an early
w a rn in g system o f p o te n tia l p r o b le m s
an d en a b les this a g e n cy to cla ssify e a ch
state b a n k b a s e d on p e r fo rm a n ce an d
c o n d itio n relative to stan dards e sta b
lis h ed b y la w a n d cu stom . W ith in this
system w a s d e v e lo p e d a list o f a p p ro x i
m a te ly 5 0 fin an cial fa cto rs w h ich w e re
fo u n d to b e p ote n tia l in d ica tors o f a
b a n k ’ s s o u n d n e s s - t w o o f th e m ost im
p orta n t fa cto rs b e in g th e loa n an d in
v estm en t p o rtfo lio s . Banks th at h a v e
ex cessiv e a m ou n ts o f loan or in vestm en t
classifica tion s are m o n ito re d m on th ly ,
a lo n g w ith q u a rterly rep orts that c o v e r
th ose fa ctors fo u n d in th e B M E S .
T h e c o m p u te r iz e d B M E S p ro g ra m
a n d th e m a n u a l p ro g ra m , d e v e lo p e d fo r
u se b y o u r field exam in ers, p e rm it us—
d u rin g an ex a m in a tion — to assist d ir e c
tors an d a ctiv e m a n a g e m e n t w ith c o r
re ctiv e p rog ra m s to retu rn loa n or in
v e stm e n t p o r tfo lio s to so u n d c o n d itio n
a n d a v o id ex ce s siv e losses.
W e w ill u se o u r p rogra m s to fa c ili
tate an d e n co u ra g e ou r banks to f o llo w
ca re fu l loa n an d in v es tm en t p rogra m s,
e x a m in e as m u c h as n ecessa ry an d
m o n ito r th em co n s ta n tly u n til this has
b e e n a c c o m p lis h e d . O u r exam iners w ill
a p p ly th e sam e stan dards in a b u siness
tu rn d o w n as w e h a v e in p rosp e ro u s
p e rio d s , b u t w ill ca ll fo r th e co n tin u e d
closer m o n ito rin g o f th e c o n d itio n o f
th e ba nks in o rd e r to d e t e c t w eak n esses
in th eir in cip ie n t stages an d co u n se l
m a n a g e m e n t to im m e d ia te ly im p le m e n t
co rr e ctiv e p rogra m s.
T h e b a n k in g in d u stry in Illin ois is
fu n d a m e n ta lly so u n d and this a g e n cy ,
th rou g h th e B ank M a n a g e m e n t E v a lu a
tion S ystem , e x p e cts to assist all Illinois
ba nks in k e e p in g it sou n d . * *
Lending Policies
(C on tin u ed from page 58)
this k eep s th e list o f loa ns a w e e k o r
m o re p a st d u e d o w n to m a n a g e a b le
size so th e b a n k ca n a ffo rd to s p e n d a
little tim e r e v ie w in g e a ch lo a n an d
fin d in g o u t w h y it’s a w e e k or m ore
p a st d u e a n d , sp e cifica lly , w h a t th e
loa n office r is d o in g to c o lle c t it.
“ T h e loa n office r s h o u ld fe e l som e
serious p ressure to d o s o m e th in g a b o u t
p ote n tia l losses. I d o n ’t b u y th e ex
p la n a tion th at a b o r r o w e r is ‘ju st s lo w .’
A b o r r o w e r w h o is careless in te n d in g
to his loa n o b lig a tio n s is, u n d o u b te d ly ,
careless in som e o f his oth er p ra ctice s,
lik e p a y in g taxes a n d a cco u n ts p a y a b le .
E v en tu a lly , it w ill c a tc h u p w ith h im
a n d y o u stan d a g o o d c h a n c e o f lo s in g
m o n e y on him .
“ O n p a st-d u e in stallm en t loa n s, o n e
g o o d p r a c tic e is to split y o u r rep ort,
b y officer, in to loa ns that are 3 0 , 60
a n d 9 0 da ys p a st d u e. T h o s e 9 0 da ys
or m o re p a st d u e h a v e r e a c h e d th e
crisis stage an d sh ou ld b e g e ttin g y o u r
b e s t efforts. A t th e sam e tim e, y o u
h a v e to g iv e a tten tion to th e 3 0 - an d
6 0 -d a y g ro u p s so th e y w o n ’t g e t to b e
9 0 da ys pa st d u e.
M r. S incla ir sa id his system w as d e
sig n e d to h a v e s o m e o n e lo o k critica lly
at e v e ry lo a n m a d e in th e b a n k ; th e
m o re dollars co m m itte d , th e m o re p e o
p le lo o k e d at th e loa n . It is im p orta n t,
h e said, to k n o w m o re than is on the
fa c e o f th e n o te a n d it is n ece ssa ry to
con ce n tra te a tten tion on th ose loans
that, b e c a u s e o f th eir size o r th eir
p oten tia l fo r loss, d e s e rv e th e m ost
atten tion . * *
FARMERS GRAIN & LIVESTOCK
HEDGING CORP.
24 H our T o ll F re e T e le p h o n e S e rv ic e
W eekly C o n fid e n tia l M a rk e t R e p o rt
M arketing S e m in a rs c o n d u c te d fo r C lie n ts in Y o u r A re a
WRITE OR CALL
F G L . 1200 35th St.
West Des M oines. Iowa 50265
515 223-2200
66
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Federal Reserve Bank of St. Louis
MID-CONTINENT BANKER for May 1, 1976
E BOATMEN'S TOWER
latm en's is moving into bold new headquarters, reflecting their strength
commitment to the future. That same strength and commitment
lcks our correspondent bank team, a team well-versed in today's
tctronic banking environment. Put Correspondent bankers
lo know the answers and have the back-up on your team,
latm en's Correspondent Bankers, technicians wheK
need them.
. <f f : "
Id
TH E BOATM EN'S
NATIONAL BA N K
*'**’*:
OF ST. LOUIS
3 1 4 / 421-5 200
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Federal Reserve Bank of St. Louis
..
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https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
NEW O FFICERS of IB A A a re (I. to r.): treas., H ow ard H. Peters; 2nd
v.p., Ivan Fugate; 1st v .p .( Ed w ard A. Trautz; pres., C h a rles O . M ad
dox Jr., and im m ediate past pres., Kenneth J. Benda.
Independents Convention
Focuses Its Spotlight
On Financial Reform
F
IN A N C IA L
REFORM
w as
the
d o m in a n t t o p ic at th e an n ua l c o n
v e n tio n o f th e In d e p e n d e n t Bankers
A sso cia tio n o f A m e rica in H o n o lu lu
M a r ch 1 5 -1 7 . In fa c t, th e a ssocia tion
issu ed a p os ition statem en t criticiz in g
th e p r o p o s e d F in a n cia l R e fo r m A c t o f
1 9 76 , a n d it w as u n a n im ou sly a d o p te d
at a sp ecia l session M a r ch 16.
L e g isla tio n p e n d in g in th e H o u s e o f
R ep resen ta tives w o u ld , a m o n g oth er
th in gs, g iv e c h e c k in g -a c c o u n t p o w e rs to
all fin an cial institu tions an d lift th e b a n
on p a y m e n t o f in terest on th ese a c
cou n ts b y 1 9 78 .
T o g iv e I B A A lea d ers an o p p o rtu n ity
to fly to W a s h in g to n , D . C ., to testify
M a r ch 18 on the leg isla tion , th e as
socia tion d e p a rte d fro m its u su al p r o
c e d u r e b y a d v a n c in g th e e le c tio n o f o f
ficers o n e da y.
T h e n e w p resid en t, C h arles O . M a d
d o x Jr., p resid en t, P e o p le s Bank, W in
d er, G a ., an d n e w s e c o n d v ic e p resi
d en t, Ivan D . F u g a te , ch a irm a n , W e s t
ern N a tion a l, D e n v e r, le ft fo r th e n a
tion ’ s ca p ita l im m e d ia te ly a fter the
M a r ch 16 th session.
Im m e d ia te P ast P resid en t K en n eth J.
B en d a , p resid en t, H a r tw ic k ( l a . ) State,
p r e s id e d at c o n v e n tio n even ts.
T h e IB A A ba ses its c o n c e rn a b o u t
th e p r o p o s e d leg isla tive p a ck a g e on a
b e lie f that m a n y o f th e ch a n g e s w o u ld
sp ell tro u b le fo r th e n a tion ’s e c o n o m y ,
con su m ers, h o m e ow n ers a n d sm all
rural banks.
“ W e are ju st c o m in g o u t o f a te rrib ly
rou g h e c o n o m ic p e r io d ,’ ’ M r. M a d d o x
said. “ N o w C on g ress w a n ts to en a ct
leg isla tion w h ic h w o u ld , u n d o u b te d ly ,
h urt b a n k in g , the n a tion ’s e c o n o m y ,
farm ers, la rge an d sm all b u sin e ssm e n
an d th e m an in th e street. P a y in g in
terest on c h e c k in g a cco u n ts is a ca s e
in p oin t. T h e v e ry w e a lth y a n d th e c o r
p ora tion s w ill b e n e fit at th e e x p e n se o f
the n e w b o r r o w e r — th e lo w - an d m id
d le -in c o m e citiz en s a n d y o u n g fa m ilies
— p e o p le w h o ca n lea st a fford th e h ig h
er in terest rates on loa ns th at w o u ld
resu lt fro m m a k in g the w e a lth y w e a lth
ier. A n y b a n k e r in N e w H a m p sh ire ,
w h e r e this p r a c tic e has b e e n a llo w e d
fo r som e tim e o n an ex p erim e n ta l basis,
w ill tell y o u th e sam e th in g .”
P oten tia l a d verse e ffects o n th e c o u n
try ’s agricu ltu ra l se cto r is o f p a rticu la r
c o n c e rn to th e associa tion , m a n y o f
w h o s e m o re than 7 ,0 0 0 sm all to m e
d iu m -s iz e d co m m e r cia l b a n k m e m b e rs
are lo c a t e d in th e M id w e st.
“ It is th e fa rm e r w h o has p u t this
co u n tr y ’ s b a la n c e o f p a y m en ts in th e
b la c k ,” M r. M a d d o x co n tin u e d . “ A n d
it’s ag ricu ltu ra l p r o d u c ts that p a y the
n a tion ’s e n e rg y bills. C o n g re s s ’ cu rre n t
fin an cial r e fo rm p rop osa ls g iv e savings
an d loa n associa tion s, m u tu a l savin gs
banks a n d c re d it u n ion s— w h ic h le n d
o n ly m in or a m ou n ts to farm ers— c o m -
SECO N D FROM TOP: Two O klahom a couples breakfast during IB A A convention. They are Mr.
and Mrs. R. J. W esner (I.) and Mr. and Mrs. J. R. Sym cox (r.). Both Mr. W esner and Mr. Sym cox
are w ith Farm ers N atio nal, C ordell—Mr. W esner a s pres, and Mr. Sym cox as ch.
THIRD FROM TOP: Ben H. Ryan Sr., past pres, of IB A A , and Mrs. Ryan enjoy IB A A breakfast.
Mr. Ryan is ch., State Bank, East M oline, III.
SECO N D FROM BOTTOM: Another Illinois banking couple, Mr. and Mrs. Donald Dem psey, enjoy
IB A A bre a kfast. Mr. Dem psey is e.v.p. & cash., W ashington State.
BOTTOM: Elton G eshw iler, v .p .. First Bank, Sp eedw ay,
photographer during IBAA bre a kfast.
Ind.,
and
Mrs.
G eshw iler
look
up
at
MID-CONTINENT BANKER for May 1. 1976
w a r d T ra u tz, p resid en t, E a st L a n s in g
( M ic h .) State; an d treasurer, H o w a r d
H . P eters, p resid en t, A m e rica n State,
W e s s in g to n S p rin gs, S. D .
N ext Y ea rs C onvention. T h e I B A A
w ill h o ld its 1 9 7 7 c o n v e n tio n M a rch
1 4 -1 6 at th e W a s h in g to n H ilto n H o te l
in W a s h in g to n , D . C . * *
p e titiv e a d v a n ta g e o v e r ba n k s th at w ill
s e v e re ly cu rta il the flo w o f fu n d s to
a g ricu ltu re .”
E le c t r o n ic fu n d s tran sfer ( E F T ) al
so w a s a h ig h -p rio rity issue a m o n g c o n
v e n tio n d e le g a te s. T h e IB A A s u cce s s
fu lly b r o u g h t suit last y e a r again st th e
C o m p tr o lle r fo r p e rm ittin g u n reg u la ted
an d n a tio n w id e u se o f cu s to m e r-b a n k
c o m m u n ica tio n s term inals
(C B C T s).
T h e associa tion c h a rg e d th at th e d e
v ice s w e re b ra n ch e s , o p e ra tin g in v io la
tion o f state b r a n c h in g la w s. T h e U . S.
D is trict C o u r t in W a s h in g to n , D . C .,
c o n c u r r e d a n d o r d e re d a p e rm a n e n t in
ju n ctio n a gainst im p le m e n ta tio n o f th e
C o m p tr o lle r ’s ru lin g. T h e suit cu rren tly
is u n d e r a p p e a l, b u t th e IB A A , at its
c o n v e n tio n , a d o p te d a resolu tion e n
d o rsin g c o n tin u e d efforts to o b ta in a f
firm a tion o f th e ju d g m e n t o f th e W a s h
in g to n D is trict C ou rt.
D a le R eista d , p re sid en t, P a y m e n t
System s, In c., N e w Y ork C ity , d is
cu s s e d in d e p e n d e n t b a n k s’ ro le in th e
e le c tr o n ic b a n k in g p h e n o m e n o n an d
u rg e d th em n o t to ig n o r e th e issue,
e v e n if th eir ba nk s are lo c a t e d in areas
n o t y e t to u c h e d b y th e m a n y E F T S
d e v e lo p m e n ts ta k in g p la ce . H e sa id th e
I B A A q u ite r ig h tfu lly is a ctiv e in E F T S
a n d d is tu rb e d a b o u t so m e im p lica tion s
th e t e c h n o lo g y has fo r th e fu tu re. H o w
ev e r, h e a d d e d , th ro u g h an in fo rm e d
m e m b e rsh ip , k n o w le d g e a b le in th e real
w o r ld p r o b le m s an d p ro sp e cts o f E F T S ,
th e I B A A w ill b e in th e b e s t p os ition
to take p a rt in th e restru ctu rin g o f the
c o m m e r cia l b a n k in g in d u stry. I n d e p e n
d e n t ba n k s w ill su rviv e in E F T S , a c
c o r d in g to M r. R eista d , b e c a u s e th ey
m ust.
T h e k e y to su rvival in an E F T e n
v iro n m e n t, a c c o r d in g to M r. R eista d ,
is p re p a re d n e ss, a n d p rep a red n ess c o n
sists o f a v a rie ty o f a ction steps. H e
d e s c r ib e d in itial steps like th is: an in i
tial assessm ent to d e te rm in e th e exten t
to w h ic h E F T is h a v in g an im p a c t on
a b a n k ’s m a rk e tin g area; a d e te rm in a
tio n o f a b a n k ’s E F T goa ls a n d p rio ri
ties; se le ctio n o f an E F T officer; analysis
b y th e o fficer o f his b a n k ’ s cu s tom er
b a se a n d an estim a tion o f that o f its
p rin cip a l c o m p e tito rs ; a list o f d e b itca rd re q u ire m e n ts a n d an exp lora tion
o f th e fe a s ib ility o f an o n -p re m ise ca sh
d is p e n sin g m a ch in e ; d e v e lo p m e n t o f
d e b it-c a r d m a rk e tin g goals th rou g h a
su rve y o f th e b a n k ’s c h e c k in g -a c c o u n t
cu sto m e rs a n d a b u d g e t to c o m p le m e n t
th e d e b it-c a r d se rv ice a n d p u rch a se
o f th e cash d isp en ser.
S u ch
steps,
he
con ten d ed ,
w o u ld
p re p a re a b a n k to p a rticip a te in E F T
d e v e lo p m e n ts w ith in its m a rk et area.
D e p e n d in g on cu s to m e r a n d m e rch a n t
a c c e p ta n c e , th e b a n k th en c o u ld ex p a n d
o r co n tra ct its E F T
system , a n d — b e
ca u se cu sto m e rs h a d b e e n co n d itio n e d
Pictured during IBAA b re a kfast a re Mr. and
Mrs. Jam es P. M arcum Jr. He's v.p., Mission
(Kan.) State.
HQPPPHP
^
M ax Sam ple, e.v.p., First N at'l, Springdale,
A rk., shares IB A A b re a kfast w ith Mrs. Sam ple.
i i FOR THE
RIGH T MAN
r
r
o
^
t
ç
r
to ca rd tran sa ction s— th e b a n k w o u ld
h a v e p a v e d th e w a y fo r n e w E F T ser
v ice s .
Resolutions. In oth er resolu tion s, th e
IB A A :
• U r g e d c o n tin u e d o p p o s itio n to
fe d e ra l S& Ls’ a c q u is itio n o f b a n k in g
p o w e rs w h ile m a in ta in in g fa v o r e d r e
serve an d tax status.
• E n c o u r a g e d s u b je ctin g m u ltib a n k
h o ld in g c o m p a n ie s to state co n trol.
• S u g g e s te d lim itin g H C ex p a n sion
to a p e r ce n ta g e o f sta tew id e c o m m e r
cia l b a n k d ep osits.
• O p p o s e d fu rth er g e o g r a p h ic a l e x
p a n sion o f b r a n ch in g .
• S u p p o r te d c o m p lia n c e b y fe d e ra l
S&Ls w ith a p p lic a b le state b ra n ch in g
law s.
• O p p o s e d in terstate m ergers.
• E n d o r s e d tax e q u a lity b e t w e e n
thrifts an d c o m m e r cia l banks.
• E n c o u r a g e d d e v e lo p m e n t o f b a n k o w n e d c o rr e s p o n d e n t ba n k s a lon g th e
lin es o f M in n es ota ’ s I n d e p e n d e n t State.
• A s k e d fo r a r e v a m p in g
m e th o d fo r ch a lle n g in g b a n k
tions an d orders.
• E n c o u r a g e d c o n tin u e d
o f state association s.
o f the
re g u la
/ r /r ...executive personnel ^
T IT
for banking, finance
I
I
and related fields
contact
{£ fr
TOM CHENOWETH,
|T
| j | manager
j
|
ff FINANCIAL? 1
PLACEMENTS^'
^912 Baltimore, Kansas City,
phone 816 421-'
tifi
fo rm a tion
N e w Officers. In a d d itio n to M essrs.
M a d d o x a n d F u g a te , oth e r n e w I B A A
officers a re: first v ic e p resid en t, E d
MID-CONTINENT BANKER for May 1, 1976
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
S—' r ^ f '
69
C on ven tion 'F irst-T im ers'
These new faces will be
representing city-correspon
dent banks at state conven
tions this year.
• S tep h en H . P a n ey k o is an assistant
v ic e p re sid e n t at C itib a n k , N e w Y ork
C ity . H e jo in e d th e b a n k six years a g o,
fo llo w in g s erv ice w ith P h ila d e lp h ia N a
tional.
Oklahoma Convention
• Jim B u rgar, assistant v ic e p resi
d e n t, F irst N a tion a l, O k la h om a C ity,
jo in e d th e b a n k in 1 9 7 2 . H e calls on
ba n k s in eastern O k la h o m a an d a d jo in
in g states. H e is a fo rm e r q u a rte rb a ck
fo r th e O k la h o m a S oon ers.
M O N TGO M ERY
• Paul B erry is v ic e p re sid e n t fo r
p u b lic affairs at U n io n N a tion a l, L ittle
R o ck . H e w ork s w ith v a riou s lo ca l,
state a n d n ation a l a g en cies.
P A N EY KO
BROOKS
• R ich a rd W . (D ick ) B rooks has
b e e n w ith First N a tion a l, K ansas C ity ,
sin ce 1 9 6 9 . H e is an assistant cash ier
in th e M aster C h a rg e D ep a rtm en t.
FRANKLIN
BURGAR
BERRY
• M ik e B ow e rs is assistant v ic e p re si
d e n t in th e co rp o r a te d iv is io n at U n ion
N a tion a l, L ittle R o c k . H e p rim a rily
w ork s w ith co rp o r a te a cco u n ts o n the
n ation a l lev el.
Arkansas Convention
• K e n n e th S. F ran k lin Jr. is an as
sistant v ic e p re sid e n t at F irst N a tion a l,
St. L o u is, w h ich h e jo in e d in 1 9 7 1 . H e
has se rv e d in th e c re d it d ep a rtm en t,
m e tro p o lita n d iv isio n an d co m m e r cia l
d ep a rtm e n t.
• D a v id
M . C u lv e r is an assistant
v ic e p re sid e n t an d h e a d o f the reg ion a l
b a n k in g d iv is ion at F irst N a tion al, St.
L ou is. H e jo in e d the b a n k in 1 9 6 7 an d
is a fo rm e r co m m e r cia l b a n k in g officer.
• S tan ley A . L a th a m is a d iv ision
loan rep fo r First N a tion a l, C h ic a g o .
H e is a ssign ed to th e w estern territory
a n d serv ices a cco u n ts in O k la h om a ,
T ex a s an d a d ja c e n t states.
BOW ERS
• R . D a v id C u llu m is an assistant
v ic e p re sid e n t in th e c o rr e s p o n d e n t d e
p a rtm en t at D e p o s it G u a ra n ty N a tion a l,
Jackson, M iss. H e jo in e d th e b a n k in
1 9 7 2 as a resea rch analyst.
DIERKS
• D a v id
BAUM AN
LATHAM
• H . C . B a u m a n is an assistant v ic e
p re sid e n t in th e co rr e s p o n d e n t d iv ision
o f C o m m e r ce Bank, K ansas C ity . H e
is a fo rm e r e x e cu tiv e v ic e p re sid e n t o f
W y a n d o tt e C o u n ty State, K ansas C ity ,
K an.
70
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Federal Reserve Bank of St. Louis
CULLUM
• A d o n a Y elton is an a c c o u n t o ffice r
at C itib a n k , N e w Y ork C ity . S h e has
b e e n w ith th e b a n k fo r sev en years an d
CULVER
A.
D ierks
is
an
assistant
v ic e p re sid e n t at F irst N a tion a l, St.
L o u is, w h ic h h e jo in e d in 1 9 6 9 , fo llo w
in g se rv ice w ith R a lston P u rin a C o .,
P ittsb u rgh .
• A1 M o n t g o m e r y jo in e d F irst N a
tiona l, M e m p h is , in 1 9 7 1 , a fter g ra d u
atin g fr o m S p rin g H ill C o lle g e , M o b ile ,
A la. H e has b e e n in th e co rr e s p o n d e n t
d e p a rtm e n t sin ce last June.
MID-CONTINENT BANKER for May I, 1976
A m u l t i 'b i l l i o n d o lla r U S . I n d iis t x y
ta k e s r o o t in T e x a s .
First City National B ank is helping
cover the field.
Agribusiness adds over $ 7 .3 billion to the
Texas econom y each year — including
livestock, crops and many related busi
nesses.
H a lf o f the state’s agricultural cash
receipts come from livestock and the
remainder from various crops, yet no
single geographic area dominates the
industry.
A more complete look at Texas’ total
agribusiness shows its national leader-
Cotton production in the northwest
and central sections earns Texas a ranking
o f first in the country. A s does beef cattle
raising in the west. Sheep and wool in the
southwest. A n d rice on the G u lf plains.
Citrus fruit production in the R io Grande
Valley is only slightly behind California
and Florida.
First C ity N ation al B ank adds its
financial seed to Texas agribusiness in
many directions. W h a t w e’ve learned is
yours.
W e ’re becoming involved with more
and more industries every day. A n d we’ re
cnm*
MID-CONTINENT BANKER for May 1, 1976
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
proving to correspondents that more ser
vice is the result of more experience.
Understanding business as well as bank
ing has helped make us . . .
A major financial strength behind
Texas industry.
FIRST
CITY
M O T IO N A L
BANK
OF HOUSTON
is a ssign ed to th e W e s t an d S ou th w est
D istrict, w h ic h in clu d e s Arkansas.
• Stephen H. Paneyko is a u nit h ea d
at C itib a n k , N e w Y ork C ity , w h ic h h e
jo in e d in 1 9 7 0 . H e h o ld s th e title o f
assistant v ic e p re sid en t an d travels in
e ig h t states.
Missouri Convention
• Bernard J. McSorley is a c o m m e r
cia l b a n k in g o fficer at F irst N a tion al,
St. L o u is, w h ich h e jo in e d as a trainee
in 1 9 70 . H e has serv ed in th e cred it
an d real estate d ep a rtm en ts.
th e C o rre s p o n d e n t
m ent.
B a n k in g
D e p a r t
• Al Montgomery is w ith th e c o r
re s p o n d e n t
b a n k in g
d e p a rtm e n t
at
F irst N a tion a l, M em p h is. H e has c o m
p le te d the b a n k ’s m a n a g em en t trainin g
p ro g ra m an d w o rk e d in th e b ra n ch sys
tem .
• Richard W . (Dick) Brooks is an
assistant cash ier in th e M aster C h a rg e
D e p a rtm e n t at F irst N a tion a l, Kansas
C ity. H e jo in e d th e b a n k in 1 9 69 .
Surveillance System
(C on tin u ed from page 42)
M cSORLEY
W ATSON
• M. Douglas Watson is an a c c o u n t
o ffice r at C itib an k , N e w Y ork C ity. H e
jo in e d th e b a n k in 1 9 7 2 an d is n o w in
the a g e n cy to n am e as fu ll parties to a
cea se -a n d -d e sis t p r o c e e d in g an y d i
rector, officer, e m p lo y e e , agen t, or o th
er p erson p a rticip a tin g in the c o n d u c t
o f the affairs o f th e ba nk. T h e n e w p r o
v ision w o u ld p erm it th e C o m p tro lle r
to d ea l m o re e ffe ctiv e ly w ith situations
w h ere the c u lp a b le p a rty is n ot the
ba nk, b u t an in d iv id u a l or co rp o ra tio n
d ire ctin g the b a n k ’ s affairs.
T h is sam e legisla tive p ro p o sa l c o n
tains som e oth er p rovision s w h ich , if
e n a cte d , w o u ld sign ifica n tly im p ro v e
the su p ervisory ab ility o f th e C o m p tr o l
ler’s office. T h e se a d d ition a l p rovision s
in clu d e n e w g rou n d s fo r r e m o v a l o f
b a n k officials an d th e strea m lin in g o f
p r o ce d u r e s to e ffe c t this p ro ce s s, an d
civ il m o n e y pen alties fo r viola tion s o f
b a n k in g law s.
O n M a rch 2 6 , 1 9 7 6 , this office testi
fied on S .2 3 0 4 b e fo r e th e C o m m itte e
on B a nking, H o u s in g an d U rb a n A f
fairs in th e U . S. Senate. T h a t testi
m o n y c o n ta in e d som e r e co m m e n d a
tions fo r c h a n g e in th e b ill that are in
te n d e d to su g gest to the c o m m itte e
w ays to stren g th en the b ill an d to e lim
inate som e fo re s e e a b le p ro b le m s, b u t
th e C o m p tr o lle r su p p orts this le g isla
tion an d h o p e s th e co m m itte e w ill is
sue a fa v o r a b le rep ort.
In co n clu s io n , I w o u ld stress the
p o in t that the fu n c tio n o f b a n k su p er
v ision an d regu la tion is n ot to m a n a g e
the ba nk, b u t rather to esta b lish b r o a d
“ yes an d n o ” p a ra m eters w ith in w h ich
th e b a n k is fre e to op era te a c c o rd in g
to m arket fo rce s . S u p ervision , th en , in
v o lv e s th e m o n ito rin g o f th e sa fe ty and
sou n d n ess o f th ose a ctivities o ccu rrin g
w ith in th ose reg u la tory param eters.
T h e ch a lle n g e to th e b a n k in g re g u la
tory a g en cies is to a p p ly su fficien t re g u
la tory constrain ts fo r e n su rin g so u n d
fin an cial p o licie s an d p ra ctice s w ith o u t
im p e d in g th ose co m p e titiv e fo r ce s that
are so n ecessa ry to a ch ie v e th e g o a l o f
p r o v id in g to th e p u b lic the b e st p o s si
b le fin an cial services at rea son a b le cost.
Every year over 30,000,000 people
buy CORNING products—
Here are two promotions that can bring in repeat customers and millions of new deposits
C O R N IN G
W A R E —
the most successful Premium Promotion ever offered
to Financial Institutions. Corning Ware and Pyrexware
are found in over 90% of all American Homes. With this
type of consumer acceptance it’s no wonder Corning
Ware can bring in millions for your Financial Institu-
(\
t
11^
AMERICAN PREMIUM
Third & Ringo
72
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Federal Reserve Bank of St. Louis
Little Rock, Arkansas 72201
Phone 501-376-3127
dorelle
y
UVINGWARE
b y C O R N IN G
American Premium offers more than merchandise alone.
We furnish ad layouts for your newspapers, mailout
brochures, and suggested radio and T.V. copy. We offer
a no-risk, 100% buy-back guarantee.
MID-CONTINENT BANKER for May 1, 1976
TH E BANKER’S NEWS
OLDPROSJOINMB&TTEAM!
BANK EDITION
VOL. I, ISSUE I
MEMPHIS, TENNESSEE
Pictured with Earl H. Triplett, president of Memphis Bank &Trust, (seated) are MB&T correspondent
bankers, Lynn Hobson, Jim Newman and Gus Morris.
Memphis, Tenn. Earl H. Triplett,
president of Memphis Bank &
Trust, announced that James M.
Newman, Jr., and C. G. (Gus)
M orris, both form er vicepresidents and Correspondent
Bank Department managers for
Union Planters National Bank,
Memplus, have been elected
vice-presidents of Memphis Bank
& Trust, and have joined with
MB&T vice-p resid en t, Lynn
Hobson, in assuming correspon
dent banking responsibilities.
Newman joined UP in 1946, was
elected a vice-president in 1960,
and was appointed head of the
correspondent bank department
in 1968.
Morris had been with UP for
29 years, and entered the Corres
pondent Bank Department in
1957. He was elected vicepresident in 1966 and served as
manager of the Correspondent
Bank Department from 1972 until
November, 1975.
Triplett said, “We are d e
lighted to have men of the calibre
of Jim Newman and Gus Morris
join our correspondent bank staff.
They are well-known and highly
respected by bankers through
out the country, and their addi
tion to this department puts added
emphasis on our growth in cor
respondent banldng.”
ALL-STAR TEAM WILL
ATTEND CONVENTIONS
Together with Lynn Hobson, Jim
Newman and Gus Morris will be
attending the upcoming bank
convention in your state. Look for
Lynn, Jim and Gus. They want to
share that famous MempJiis Bank
& Trust hospitality with all their
banking friends.
Correspondent Bank Department
MEMPHIS BANK ©’TRUST
Memphis, Tennessee 38101
MEMBER FDIC
WATS Une: Tennessee—1-800-582-6277 / Other States—1-800-238-7477
MID-CONTINENT BANKER for May 1, 1976
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
73
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Federal Reserve Bank of St. Louis
SEE WHAT THE FUTURE
HO LDS AT THE C O M M E R C IA L C A SB A H
C o m m ercial National has some great
A rab ian nights for you at the Arkansas
Banker’s Convention,
Hold out your hand to psychic and
palmist Carol Jones and see the future
with C o m m ercial National Bank. Take a
m a g ic ca rp e t g lide and d a n c e to the
sounds of the Art Porter Trio. Sip a cool
one at the oasis.
C o m e to the C o m m ercial C a sb a h .
It’s 1001 nights of fun. Just say, “Open
se sam e .”
C a r o l J o n e s is the
nationally-known director
of the Arkansas
Metaphysical Foundation
She is a psychic, palmist
clairvoyant, astrologist.
and is pretty. Carol wants
to hold your hand
FOKI
The C o m m ercial C a sb a h
Arkansas Banker's Convention
Jupiter Suite, Arlington Hotel
M ay 15,16,17
Arkansas Convention
President
Hot Springs, May 16-18
H e a d q u a rte rs-A R L IN G T O N
HOTEL
PROGRAM
FIRST SESSION , 9 :3 0 a.m ., M ay 17
Call to Order— D O R M A N F . B U S H O N G , p resid en t, A rkansas B a n k
ers A s so cia tio n , a n d p resid en t, F arm ers & M erch a n ts B ank, R og ers.
BUSHON G
Invocation.
Dorman F. Bushong, Ark.BA pres., becam e a
ban ker in 1946 at Bank of G ain esville, Mo. After
service w ith other banks in M issouri, he
joined the FDIC in 1952 and Farm ers &
M erchants Bank, Rogers, in 1956. He becam e
pres. & C EO there in 1964 and presently chairs
the State Bank Board.
President-Elect
President’s Address— D O R M A N F . B U S H O N G .
A d d re s s— G E O R G E L e M A I S T R E , d ire cto r, F e d e ra l D e p o s it In su ra n ce
C o r p ., W a s h in g to n , D . C .
A d d re s s— L A W R E N C E K R E I D E R , e x e cu tiv e v ic e p resid en t,
fe r e n c e o f State B ank S u pervisors, W a s h in g to n , D . C .
C on
A d d re s s— H . J O E S E L B Y , F irst D e p u t y C o m p tr o lle r o f th e C u rren cy ,
W a s h in g to n , D. C .
Announcements and Awarding of Door Prize.
Adjournment.
SECO N D SESSION , 9 :3 0 a .m ., M ay 18
C a ll to Order— D O R M A N F . B U S H O N G .
Report of the Treasurer— J A M E S D . C O O K , treasurer, A rkansas B a n k
ers A sso cia tio n , a n d p re sid e n t an d C E O , N a tion a l B ank o f C o m
m e rce , E l D o r a d o .
KEN NEDY
Pres.-elect of the A rk.B A is W illiam
H. Kennedy Jr., a native of Pine Bluff, w here
he is pres., N at'l Bank of Commerce.
Mr. Kennedy is a past ch., ABA Governm ent
Relations Council, and has chaired the
A rk.B A 's Federal and State Governm ent
Relations Com m ittees.
Meeting of Arkansas Members of the American Bankers Association.
Resolutions
Committee
Report— W .
ch a irm an , a n d ch a irm a n
A rkansas, F orrest C ity.
and
M . C A M P B E L L , co m m itte e
C E O , F irst N a tion a l o f E astern
Election of Officers.
Announcements and Awarding of Door Prize.
Adjournment.
V ice President
Convention Speakers
CUPP
Cecil W. Cupp Jr., A rk.B A v.p., is pres. & C EO ,
A rk a n sa s Bank, Hot Springs, and ch.,
Citizens First N at'l, A rk a d e lp h ia. He is a
past dir., St. Louis Fed, and is the
A B A state v.p. Mr. Cupp also is a dir. of
First A rk a n sa s Developm ent Finance Corp.
MID-CONTINENT BANKER for May 1, 1976
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
LeMAISTRE
KREIDER
75
A rk.B A Treasurer
Three Washington Speakers Scheduled
To Appear at Arkansas Convention
T
H E A R L IN G T O N
H O T E L w ill
host th e 8 6 th an n ual c o n v e n tio n o f
the A rkansas Bankers A ssocia tion , M a y
1 6 -1 8 . S c h e d u le d to ad dress the first
b u siness session, M a y 17, are G e o rg e
L e M a is tre , F D I C d ire cto r; L a w r e n c e
K reid er, e x e cu tiv e v ic e p resid en t, C o n
fe r e n c e o f State B ank S u p ervisors; an d
H . Joe S elb y , F irst D e p u t y C o m p tro lle r
o f the C u rre n cy , all o f W a sh in g to n ,
D . C.
T h e p a st-p re sid e n ts’ d in n er has b e e n
s c h e d u le d as a p r e -co n v e n tio n ev en t. It
w ill b e h e ld in H o t Sprin gs M a y 15 an d
all pa st associa tion presid en ts are in
v ite d .
H o sp ita lity suites w ill b e o p e n ev e ry
n ig h t o f th e c o n v e n tio n , co u rte s y o f
th e L ittle R o c k ba nks, w h ile exhibits
w ill g o on d is p la y S u n d a y , M a y 16,
an d w ill b e o p e n ev e ry a ftern oon o f
the c o n v e n tio n .
The
tennis
tou rn a m en t w ill
get
u n d e r w a y at 1 p .m . M a y 17 at th e H o t
Sp rin gs C o u n try C lu b an d w ill b e c o n
c lu d e d th ere b e g in n in g at 1 :3 0 p .m .
M a y 18. T h e H o t Sprin gs C o u n try
C lu b also w ill h ost th e an n ua l g o lf
tou rn a m en t on M a y 18. A w a rd s fo r
th ose even ts w ill b e g iv e n at the an n ual
b a n q u e t.
D u rin g th e an n ual b a n q u e t, w h ich
is slated fo r M a y 18, th e n e w p re sid e n t
o f the associa tion w ill b e in stalled, an d
th e B erl O ls w a n g e r O rch estra fro m
M e m p h is w ill p r o v id e th e en tertain
m en t.
R e so lu tio n s co m m itte e m em b ers in
c lu d e W . M . C a m p b e ll, ch a irm an , First
N a tio n a l o f E astern Arkansas, F orrest
C ity ; B e v e rly L a m b e rt, p re sid e n t an d
C E O , F irst State, C rossett; R ich a rd
Butler, ch a irm an , C o m m e rcia l N a tion a l,
L ittle R o c k ; C la u d T . F rank, ch a irm an
an d p resid en t, M erch a n ts & F arm ers
Bank, D u m a s ; Jack K. H o g a n , p re sid e n t
a n d C E O , Bank o f W e s t M e m p h is;
L . E . H u rle y , ch a irm an , E x ch a n g e
B ank, E l D o r a d o ; G e o r g e P e ck Sr.,
ch a irm an , p re sid e n t an d C E O , C o m
m ercia l N a tion a l, T exa rk a n a ; M a rvin
E . P h elp s, p re sid e n t an d C E O , B ank o f
W a ld r o n ; L o u is L. R a m say Jr., p resi
d e n t an d C E O , Sim m on s F irst N a tion al,
P in e B lu ff; L e o n C . C a stlin g, p resi
d en t, F irst N a tion a l, M arian n a ; M ean s
W ilk in s o n , ch a irm a n an d C E O , F a rm
ers Bank, G r e e n w o o d ; an d T h o m a s G .
W ils o n , ch a irm a n an d C E O , F irst State,
C onw ay. * *
Bank Holds 'M oney Sale'
L IT T L E ROCK— The new $2
bills became available last April 13.
To take a promotional advantage of
the event, First National proclaimed
a money sale on that day.
The new bills were exchanged for
the bargain price of $1.95, one to
a customer. The uncirculated notes
were enclosed in special cellophane
“first-day” packets for collectors.
M ichael, Brannon & Smith
To Leave Executive Council
T h re e Arkansas ba n k ers w ill b e le a v
in g th e Arkansas Bankers A s s o cia tio n ’s
e x e cu tiv e co m m itte e this y e a r: F re d
M ich a e l, p resid en t, F irst State o f L a k e
V illa g e ; Joh n n y B ran n an , p resid en t,
B ank o f P rescott; a n d H o r a c e Sm ith,
e x e cu tiv e
v ic e
p resid en t,
B ank
of
H arrisb u rg.
M r. M ich a e l has serv ed as his b a n k ’s
p re sid e n t sin ce 1 9 6 2 an d is a g ra d u a te
o f th e S c h o o l o f B a n kin g o f th e S ou th
at L ou isia n a State U n iv ersity , B aton
R o u g e . H e has se rv e d as ch a irm a n o f
the A rk .B A G ro u p F iv e an d o f th e
a ssocia tion ’s A g ricu ltu ra l, R esolu tion s
an d E d u c a tio n co m m itte e s . In 1 9 7 2 -7 3 ,
M r. M ich a e l w as A rk .B A treasurer an d
has se rv e d as an in stru ctor in a g ricu l
tural c re d it in th e a ssocia tion ’ s B asic
S c h o o l o f B a n k in g an d the L e n d in g
C ou rse, 1 9 6 9 -7 5 .
M r. B rannan, a n a tive o f H o p e , w as
in th e agricu ltu ral bu sin ess u n til h e
jo in e d F irst N a tion a l, D allas, in 1 9 60 .
H e retu rn ed to Arkansas in 1 9 6 2 to
jo in C o m m e r cia l N a tion a l, L ittle R o ck ,
w h e r e h e a d v a n c e d to sen ior v ic e p resi
d e n t b e fo r e re sig n in g 10 years later.
H e th en w as n a m e d to his p resen t post,
p resid en t an d C E O , B ank o f P rescott.
M r. B ran n on has se rv e d in a n u m b e r
o f ca p a cities o n co m m ittees o f th e A B A
an d th e Ark. BA.
In fo rm a tio n on M r. Sm ith w a s n ’t
a v a ila b le at press tim e.
M ICH AEL
76
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Federal Reserve Bank of St. Louis
BRANNAN
Jam es
D.
Cook
is
treas.,
A rk.B A ,
and
pres.
& C EO ,
Nat'l
Bank of Com m erce, El
Dorado. He joined his
bank
in
1954
and
served there as t.o.,
cash, and v.p. prior to
advan cing to his pres
ent position. He a t
tended the Southw est
ern G ra d u ate
School
of Banking and pres
ently chairs the Ark.
BA O peratio ns Com
mittee.
■ C O M M E R C I A L N A T I O N A L , L ittle
R o c k , has re o rg a n iz e d its data p r o ce s s
in g d e p a rtm e n t to a c c o m m o d a te m a jo r
exp an sion s in th e c o m p u te r services
field . D a ta p ro ce s sin g resp on sib ilities
h a v e b e e n p la c e d u n d e r d ire ctio n o f
C o m m e r cia l N a tion a l F in a n cia l S ervices
C o r p ., a w h o lly o w n e d su b sid ia ry o f
th e bank. E . T h o m a s B rid g ers is that
c o m p a n y ’s p re sid e n t an d five m a n a gers
h a v e b e e n n a m e d fo r the d iv isio n s:
D ic k N a n n en , d a ta p ro ce s s in g ; M a rvin
S tu m p e, system s d e v e lo p m e n t;
R on
Strother, m a n a g e m e n t serv ices; T o m
F o r d , d a ta o p era tion s ; a n d R a lp h M u n d a y, system s su p p ort.
■ D A L E M . T A Y L O R has b e e n e le c t
e d e x e cu tiv e v ic e p re sid e n t o f C o m
m ercia l N a tion a l M o rtg a g e C o ., L ittle
R o ck , a w h o lly o w n e d su b sid ia ry o f
C o m m e r cia l N a tion a l, L ittle R o ck . A lso
p r o m o te d
at
C o m m e r cia l
N a tion a l
M o rtg a g e w e r e B. J. W iess, to v ic e
p re sid e n t a n d secretary-trea su rer, an d
Janis M o n t g o m e r y a n d W illia m
G.
R o e h r e n b e ck , to assistant v ic e p re si
dents. M essrs. T a y lo r a n d W ie s s h a v e
b e e n w ith th e c o m p a n y sin ce 1 9 7 2 ;
M iss M o n tg o m e ry , sin ce 1 9 7 4 ; an d M r.
R o e h r e n b e ck , sin ce 1973 .
A B A M arketing Conference
Set for N ew York City
N E W Y O R K — “ M a rk etin g in an A g e
o f U n ce rta in ty ” is th e th em e o f th e
1 9 7 6 A B A N a tion a l M a rk e tin g C o n fe r
e n ce , set fo r M a y 1 6 -1 8 at th e W a ld o r f
A storia H o te l h ere. T h e c o n fe r e n c e has
b e e n d e s ig n e d to z e r o in on m a jor p r o
fession a l co n c e rn s o f to d a y ’ s b a n k m a r
k etin g officer, a c c o r d in g to W a rn e r N .
D a lh o u se , ch a irm a n , an d e x e cu tiv e v ic e
p resid en t,
F irst
N a tion a l
E x ch a n g e
Bank, R o a n o k e , V a .
T o p ic s to b e c o v e r e d in clu d e e c o
n o m ic, leg isla tiv e an d o p era tio n a l d e
v e lo p m e n ts th at m a y a ffe ct th e c o n d i
tion o f th e in d u stry d u rin g th e n ext
year, an d the role m a rk etin g sh o u ld
p la y in lig h t o f th ese fa ctors. In th e
leg isla tiv e arena, em p h a sis w ill b e
p la c e d
on cu rren t fin an cial re fo rm
p rop osa ls.
MID-CONTINENT BANKER for May 1, 1976
Their credit life teach er
is th e b est.
Last year ex-Standard Life salesmen wrote more than $15,000,000
of credit life premiums for their companies. And we’re proud of them.
We’re glad to see other companies in the credit life field, even when they’re
staffed with ex-Standard Life representatives—because Standard pioneered
credit life insurance in this area, and we’ve been the pacesetters ever since.
That’s because we take credit life seriously. We’ve never considered it a sideline.
And we’re proud to point out that Standard Life writes more credit life than
any company in our area. In fact, most of the new things in the field were
created by Standard.
So, you can bet those salesmen know credit life. They learned it
from the Standard in the business.
Now, they only have one problem. We’re continuing to set the pace.
And they’ll have to work very hard just to keep up.
Contact our home office for more information.
Standardlife
Insurance Company/Jackson, Mississippi
MID-CONTINENT BANKER for May 1, 1976
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
77
it
There’s
somethings
younever forget...
111
sweetheart”
C
• fs .
Mk K
....
Join us at
Worthens CasaBanka, a revival of
the Humphrey Bogart movie classic,
Casablanca, to be held during the
Arkansas Bankers Convention
at the Arlington Hotel in Hot Springs.
Worthens CasaBanka
Some things you never forget.
W O RTH EN
Bank & Trust Company, N. A.
Little Rock, Arkansas
3 fa b cD c o m p a n y
May 15-18, Juno Tower Suite, Henry Shead and Tony Lunney playing all your favorites at the piano bar.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
M c l'llx 'l FI !
Bankers and Educators
Are in Lineup June 12
For Junior Bankers Conf.
H O T S P R IN G S — T h e A rlin g to n H o
tel is s c h e d u le d as th e site o f th e 1 9 7 6
e d u ca tio n a l c o n fe r e n c e o f th e Junior
B ankers S e ctio n o f the A rkansas B a n k
ers A s so cia tio n June 12. O n h a n d w ill
b e n o t e d b a n k ers an d e d u ca tors to p r o
v id e in sigh ts o n a n u m b e r o f to p ica l
issues.
A p a n e l d is cu ss io n g iv in g an “ E F T S
U p d a te ’ w ill b e le d b y W illia m B ra n
d o n , p re sid e n t a n d C E O , F irst N a tion a l
o f P h illip s C o u n ty , H e le n a , w h ile A r
kansas B ankers A s so cia tio n P resid en t
W illia m H . K e n n e d y Jr. w ill ad d ress
th e c o n fe r e n c e -g o e r s . M r. K e n n e d y is
p re sid e n t a n d C E O , N a tion a l B a n k o f
C o m m e r ce , P in e B luff.
N ich o la s A . B e a d le s o f th e U n iv e r
sity o f G e o rg ia , A th en s, w ill take a
lo o k at “ E c o n o m ic In d ica to rs ,” an d
M o rris E . M a ss e y o f th e U n iv ersity o f
C o lo r a d o -B o u ld e r w ill tell th e Junior
B ankers “ W h a t Y o u A re Is W h e r e Y ou
W e r e W h e n .” B essie M o o r e , d ire cto r,
A rk an sas State C o u n c il o n E c o n o m ic
E d u c a tio n , L ittle R o c k , is s c h e d u le d to
d iscu ss “ E c o n o m ic E d u c a tio n in A rk a n -
W HITE
RUSK
LINDSEY
sas.”
P resid en t o f th e Ju n ior Bankers is
R a lp h E . W h ite , assistant v ic e p re si
d en t, A rkansas Bank, H o t S p rin gs,
w h ic h h e jo in e d in 1 9 6 4 . H e s e rv e d as
a n o te teller until 1 9 6 6 , w h e n h e w as
n a m e d m a n a g er o f th e c o m m e r cia l n o te
d ep a rtm en t. M r. W h ite w a s p r o m o te d
to his p resen t p o s itio n in 1 9 6 8 an d c u r
ren tly serves as a real estate loa n officer.
B a rt R . L in d s e y , m a rk etin g d e p a rt
m e n t h ea d , F irst N a tion a l o f P h illips
C o u n ty , H elen a , is v ic e p re sid e n t o f
th e Ju n ior B ankers. H e jo in e d his b a n k
in 1 9 7 0 an d is a g ra d u a te o f th e A rk a n
sas S c h o o l o f B a sic B a n k in g a n d o f th e
S c h o o l o f B a n k in g o f th e S ou th at
L ou isia n a
R ouge.
State
S erv in g
is
B.
J.
a u d itor,
U n iv ersity ,
B a ton
as Junior B a n k er treasurer
R usk,
assistant
F irst N a tion a l,
ca sh ier
an d
Stuttgart.
He
BLANCHARD
b e g a n his ca reer as ca sh ier fo r S tep h en s,
In c., in v e s tm e n t ba nkers, g o in g to F irst
N a tion a l in 1 9 7 4 . In a d d ition , M r. R u sk
se rv e d as th e 1 9 7 5 Junior B ankers S e c
tion c o n v e n t io n ch a irm an .
S ecreta ry o f th e Ju n ior Bankers is
C h arles H . B la n ch a rd . H e is assistant
v ic e p resid en t, F irst State, C o n w a y ,
w h ic h h e jo in e d in 1 9 7 4 after serv in g
as c o m m e r cia l m a n a g er o f S ou th w e st
ern B ell, D allas. M r. B la n ch a rd is a
g ra d u a te o f th e A rkansas B a n k in g
S c h o o l’s B a sic/In te rn a tio n a l, L e n d in g
an d T ru st cou rses a n d w a s p re sid e n t o f
his class in th e T ru st C ou rse.
■ D A N IE L
R . G R A N T , p resid e n t,
O u a ch ita B a ptist U n iv ersity , A rk a d e lp h ia , has b e e n e le c te d a d ir e c to r o f
U n io n N a tion a l, L ittle R o c k . M r. G ra n t
is an a u th ority o n u rb a n a n d m e tro
p o lita n a n d in te r-g o v e rn m e n ta l rela
tions.
S p ecia lizin g in A rka n sa s
M u n ic ip a l B onds
S in ce 1931
COMPLETE INVESTMENT SERVICE
TO BANKS
OFFERINGS
BIDS
APPRAISALS
H ill, C raw ford & Lanford, Inc.
MEMBERS
SECURITIES INDUSTRY ASSN.
NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC.
SECURITIES INVESTORS PROTECTION CORP.
ARKANSAS BANKERS ASSN.
BOYLE BUILDIN G
LITTLE RO CK
HARROW SMITH COM PANY
Union N atio nal Bank Bldg.
501/3 7 4 -7 5 5 5
Little Rock, A rk a n sa s
J. E. W OM ELD ORFF, Executive V ice President
PHON E 5 0 1 /3 7 4 -8 2 7 6
MID-CONTINENT BANKER for May 1, 1976
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
79
Union Nat l of Little Rock
th r o u g h o u t
th e
fo r e s e e a b le
fu tu re.
T h e re w ill b e o n e class p e r season , fo r
a total o f 4 0 trainees e n ro lle d y e a rly.
A fa c to r in th e b a n k ’s d e cis io n to
c o n tin u e th e p r o g r a m is th e u n ifo r m ly
h ig h p e r fo r m a n c e r e c o r d o f th e g ra d u
ates w h o h a v e b e e n a d d e d to th e U n io n
N a tion a l staff. In fa ct, several are said
to b e u n d er con s id e ra tio n fo r m a n a g e
m en t p ote n tia l an d are b e in g g ro o m e d
fo r a d d e d jo b resp on sib ilities.
Offers Training Program
To Under-and Unemployed
L I T T L E R O C K — W h ile all ba nks
p r o v id e so m e ty p e o f train in g fo r n e w
e m p lo y e e s , U n io n N a tion a l has taken a
step that it b e lie v e s to b e th e first in
th e n ation . It is train in g th ose w h o
a ren ’t e m p lo y e e s .
T h e p ro g ra m is fo r u n e m p lo y e d — or
u n d e r e m p lo y e d — in d iv id u a ls w h o g et
th e c h a n c e to train th em selves fo r jo b s
in th e fin an cial c o m m u n ity . B ank o f
ficials fe lt that u n e m p lo y m e n t an d u n
d e r e m p lo y m e n t w e re co m m u n ity p r o b
lem s an d that it w a s U n ion N a tio n a l’ s
re sp o n sib ility to h e lp a llevia te th e situa
tion.
Colorado, N. C ., Mexico
To Be Assemblies Sites
During Coming Months
Eugene B. Smith Jr., first v.p. and exec. comm,
ch., Union N at'l, Little Rock, presents certificate
of completion in bank's training course to
N adine Pashel, w ho w orks in vault. Course is
co-sponsored by bank, O pportunities Indus
trializatio n Center—fe d erally funded nation
w ide org an izatio n —and trains under- or un
em ployed a re a individ uals for jobs in financial
community.
T h e C u sto m e r S erv ice T ra in in g P r o j
ect, as it is ca lle d , is o p e ra te d u n d er
th e jo in t sp on sorsh ip o f th e b a n k an d
th e
O p p o rtu n itie s
In d u stria liza tion
C e n te r (O I C ), a fe d e r a lly fu n d e d n a
tio n w id e o rg a n iz a tion . E lig ib le in d iv id
uals— ages 1 8 -2 5 — w h o h a v e n o w o rk
o r w h o are w o rk in g fo r less than the
m in im u m w a g e ,
g et a se v e n -w e e k
co u rse : fo u r w e e k s o f cla ssroom w o rk
at O I C h ea d q u a rte rs as a g en era l o r ie n
ta tion , th en th ree w eek s o n -th e -jo b
trainin g in U n io n N a tio n a l’s M a in O f
fice.
T ra in ees r e ce iv e n o p a y , a fa c to r that
serves to m o tiv a te th em , a b a n k official
states. M o st o f th e trainees fe e l that
“ th e d o o r to a p ro m is in g ca reer w as
b e in g o p e n e d ” fo r th em , th e official
adds.
C u rricu lu m fo r th e cou rse is v a ried ,
c o v e r in g to p ics su ch as h o w ba nks are
o rg a n iz e d , se cu rity p r o ce d u r e s , b o o k
k e e p in g , n e w a cco u n ts , p r o o f, in stall
A
m en t loans, etc. S in ce m ost jo b o p e n
in gs are in b o o k k e e p in g , p r o o f an d
teller training, th ose areas g et h e a v y
em p h a sis in b o t h ph ases o f the trainin g.
B u t trainees aren ’t lim ite d to th ose
areas.
In stru ctors p la c e em p ha sis o n tw o
th em es: cla r ify in g th e th e o ry b e h in d
e a c h b a n k in g fu n c tio n an d ex p la in in g
th e d es ired resu lt o f e a ch . F a m ilia riza
tion w ith b a n k te r m in o lo g y is an oth er
im p orta n t asp ect.
T ra in ees w h o c o m p le t e th e co u rse
are c o n s id e r e d fo r an y a v a ila b le jo b
o p e n in g s at U n io n N a tion al. M ost h a v e
b e e n h ire d th ere, w h ile oth ers h a v e
b e e n taken o n b y o th e r cen tra l A rk a n
sas banks.
T h e b a n k rep orts that the p ro g ra m is
so su cces sfu l th at it w ill b e c o n tin u e d
P R O F IT A B L E L O C A T I O N
FOR N E W
IN D U S T R Y
C O N W A Y has 3 highly desirable industrial sites
available on the Arkansas River, each selected by
the University of Arkansas Research Center.
FIRST STATE BANK & TRUST COMPANY
f
a
,l ,« n cnr
C o n w ay , A rk a n sa s
M em ber F D IC
80
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Thos. G. W ilson, Chairman
& c h ie f Executive officer
A rea Code 501/329-5656
D A L L A S — T h e F o u n d a tio n o f th e
S ou th w estern G ra d u a te S c h o o l o f B a nk
in g,
S ou th ern
M e th o d is t U n iv ersity
h ere, has a n n o u n c e d th ree u p c o m in g
A ssem b lies fo r B ank D ire cto rs:
• 2 5 th A s se m b ly , T h e B ro a d m o o r,
C o lo r a d o S p rin gs, S e p te m b e r 4 -7 .
• 2 6 th A s se m b ly , P in eh u rst H o te l &
C o u n try C lu b , Pin eh urst, N . C ., N o
v e m b e r 4 -7 .
• 2 7 th A s s e m b ly , E l C a m in o R ea l,
M e x ic o C ity , F e b ru a ry 3 -6 , 1 9 77 .
S erv in g as d irectors o f th e A s se m
b lie s w ill b e : 2 5 th A s s e m b ly — D r. W il
liam H . B a u g h n , d ea n , S c h o o l o f B u si
ness, U n iv ersity o f C o lo ra d o , B o u ld e r,
an d d ire cto r, S tonier G ra d u a te S c h o o l
o f B a n k in g ; 2 6 th A s s e m b ly — C . C .
H o p e Jr., e x e cu tiv e v ic e p resid e n t, F irst
U n io n N a tion a l o f N orth C a rolin a ,
C h a rlotte; a n d 2 7 th A s s e m b ly — B. F in
le y V in s on , ch a irm a n , F irst N a tion a l,
L ittle R o c k , an d pa st p resid e n t, A rk an
sas B ankers A sso cia tio n .
P u rp os e o f th e A s sem b lie s is to in
crea se th e d ir e c to r ’s u n d ersta n d in g o f
h o w h e can serve his b a n k ; to in d ica te
w a y s in w h ic h th e d ir e c to r ca n b e s t
serve as a rep resen ta tive o f his b a n k
in the c o m m u n ity ; to p r o v id e b e tte r
u n d e rsta n d in g o f an d r e sp e ct fo r b a n k
m a n a g e m e n t’ s fu n c tio n s ; an d to a c
q u a in t th e d ir e c to r fu lly w ith issues o f
critica l in terest to his b a n k an d b a n k in g .
T h e A ssem b lies in co rp o ra te discu ssion
g rou p s le d b y b a n k C E O s an d d ire cto rs
as w e ll as lectu res a n d a s p e cia l e d u c a
tion a l p r o g r a m f o r sp ou ses.
N e w em p h a ses d e v e lo p e d fo r u p
c o m in g A s sem b lies w ill b e o n E F T S
an d its im p lica tio n s ; a n a ly zin g b a n k
o p era tion s ; th e d ir e c to r ’ s ro le in b a n k
au dits; loa n p ro b le m s to d a y — w h a t th e
d ir e c to r sh ou ld k n o w a n d d o ; p la n n in g ,
b u d g e tin g a n d ca p ita l m a n a g e m e n t;
th e c u s to m e r a n d the m a rk et; an d lia
b ility in su ra n ce an d oth e r program s.
F o r in fo rm a tio n a b o u t th e A sse m b lie s
fo r B ank D ire cto rs, w rite : D r. R ich a rd
B. Johnson, P resid en t, T h e F o u n d a tio n
o f th e S ou th w estern G ra d u a te S ch o o l
o f B a n k in g, S M U , B o x 1 3 1 9 , D a lla s,
T X 75275.
MID-CONTINENT BANKER for M ay 1, 1976
MID-CONTINENT BANKER lor May 1, 1976
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
From the Heart
of Missouri
Central Trust Bank
Central Motor Bank
Central Trust is constantly in tune with the growth of Central Missouri and stands
ready to serve all your correspondent needs with the best in modern banking.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
We look forward to seeing you at the MBA convention in St. Louis, May 16-18.
Fred Rost, Senior Vice President
John Morris, Senior Vice President • Jim Herfurth, Senior Vice President
You have a friend at
TH E C EN T R A LT R U S T BAN K
JEFFERSON CITY, MISSOURI
65101
Member Federal Deposit Insurance Corporation
MID-CONTINENT BANKER for May 1, 1976
Missouri Convention
St. Louis, May 16-18
President
H ead q u arters—Stouffer's Riverfront Inn
PROGRAM
FIRST SESSION , 1:15 p.m ., M ay 17
C a ll to O rder— J O H N H . O B E R M A N N , c o n v e n tio n ch a irm an , an d
p resid en t, M e rca n tile C o m m e r c e T ru st, St. L ou is.
W e lc o m e — J O H N P O E L K E R , m a y or, St. L o u is.
R em ark s— R I C H A R D J. P F L E G I N G , M B A pres., a n d p res., B ank o f
St. A n n .
PFLEG IN G
Richard J. Pfleging, MBA pres, is pres., Bank
of St. Ann. He entered banking in 1948 at
O ran g e County Trust, M iddletow n, N. Y . Mr.
Pfleging served w ith H anover Bank, N ew
York City, 1949-55, and the N ew York Fed,
1955-61, then w ent to Brentwood (Mo.) Bank.
He joined Bank of St. Ann in 1964.
Executive Vice President’s Report— F E L I X
L eG R A N D ,
Jefferson
C ity.
Treasurer’s Report— M I L L S H . A N D E R S O N , M B A treasurer, a n d
p resid en t, B ank o f C a rth a ge.
Introduction of Regional Vice Presidents, Secretaries and Chairmen
of Standing and Special Committees.
Report of Committee on Nominations and Election of Officers.
V ice President
Address— “ T h e E c o n o m ic O u tlo o k in an E le ctio n Y ear” — M U R R A Y
L . W E I D E N B A U M , p ro fe ss o r o f e c o n o m ic s , W a s h in g to n U n iv e r
sity, St. L ou is.
Address— “ B e y o n d ’ 7 6 , A m e rica ’s B est C e n tu r y ’ — B I L L M O N R O E ,
W a s h in g to n E d ito r, N B C T e le v is io n N e tw o rk , W a s h in g to n , D . C .
Announcements and Adjournment.
SECO N D SESSION , 9 :3 0 a.m ., M ay 18
C a ll to Order— R I C H A R D J. P F L E G I N G .
Address— C L I F F O R D M. H A R D I N , v ic e ch a irm an , R a lston P u rin a
RICHM OND
C harles K. Richmond is MBA v.p. He joined
Am erican N at'l, St. Joseph, 1946, and w a s
elected an officer in 1949. Mr. Richmond
ad van ced to his present position,
e.v.p ., in 1973.
C o ., St. L o u is.
A d d re s s — “ B a n k in g : T h e R ic h G e t R ic h e r ” — H A R R Y V . K E E F E JR.,
p resid en t, K e e fe , B ru y ette & W o o d s , In c., N e w Y ork C ity .
Announcements and Adjournment.
THIRD SESSION , 2 p.m ., M ay 18
Treasurer
C a ll to Order— R I C H A R D J. P F L E G I N G .
Meeting of Missouri Members of the American Bankers Association—
J A M E S J. L A N N I N G , A B A state v ic e p resid en t, a n d ch a irm a n an d
p resid en t, R ed B r id g e B ank, K ansas C ity.
Election of Member and Alternate Member of Nominating Committee
to Serve at 1976 ABA Convention.
Address— “ It’ s W h a t Y o u L ea rn A fter Y o u K n o w It A ll” — C Y L V I A A .
S O R K IN , St. L o u is e c o n o m is t a n d b u siness con su ltan t.
Address— “ U . S. Savings B o n d P resen ta tion ” — H A R R I S O N E . C O E R V E R , A B A sa vings b o n d s c o o rd in a to r a n d state b a n k in g ch a irm a n ,
a n d p resid en t, M e rca n tile T ru st, St. L ou is.
AN DERSON
Treas. of the M BA is Mills H. A nderson, pres.
& C EO , Bank of C arth a g e , w hich he joined in
1946, ad van cing to his present position in
1959. Mr. Anderson has chaired the follow ing
M BA committees: G overnm ental A ffairs and
Consum er Finance.
MID-CONTINENT BANKER for May 1, 1976
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Installation of New Officers.
Unfinished Business.
New Business.
Announcements and Adjournment.
83
Noted Speakers, River Trip
Are on M BA Schedule
For St. Louis Convention
S T . L O U I S — A v a riety o f n o te d n a
tiona l, re g io n a l an d lo ca l sp eakers an d
an e v e n in g o n the steam er Adm iral are
so m e o f th e h igh ligh ts o f this y e a r’s
M issou ri Bankers A s so cia tio n c o n v e n
tion. T h e e v e n t w ill take p la ce M a y
1 6 -1 8 at S to u ffe r’ s R iv e rfro n t Inn.
P re sid in g o v e r th e first bu sin ess ses
sion in th e M ississip p i an d Illin ois
room s, b e g in n in g at 1 :1 5 p .m . M a y 17
w ill b e C o n v e n tio n C h a irm a n John H .
O b e rm a n n , p re sid en t, M e rca n tile C o m
m e r c e T ru st, St. L ou is. H e w ill in tro
d u c e the b u sin ess session ’s first speaker,
St. L o u is M a y o r John P oelk er, w h o w ill
POELKER
M em bers of MBA convention committee gather for pre-convention meeting: (standing, from I.) Felix
LeG rand, MBA e.v.p .; W ebe H. Naunheim , ch. & pres., C harter Bank, O v e rlan d ; W illiam Stephenson,
MBA adm in, asst.; G eorge M. Baggott, a .v .p ., M ercantile Trust, St. Louis; Roy Schum acher, MBA
PR dir.; Richard J. Pfleging, MBA pres., and pres., Bank of St. Ann; Thom as M. Fitzgerald, corres.
off.. M ercantile Trust, St. Louis; and Al Dix of Brede, Inc., St. Louis, in charge of convention dis
plays. Seated from I. are John H. S. Dressel, pres., G ra v o is Bank, Affton; John H. O berm ann,
convention comm, ch., and pres., M ercantile-Com m erce Trust, St. Louis; and Dru D. Salveter,
pres., Bank of Crocker. Not present a re Don V. Thom ason, convention comm. v. ch., and s.v.p.,
United M issouri Bank, K an sas City; June Darby Ellison, PR off., M ercantile Trust, St. Louis; and
W illiam O . W eis, v.p.. First N at'l, K an sas City.
w e lc o m e th e co n v e n tio n -g o e rs .
A ls o o n h a n d to ad dress th e first ses
sion w ill b e M u rra y L . W e id e n b a u m ,
p ro fe ss o r o f e c o n o m ics fro m W a s h in g
ton U n iv ersity , St. L ou is. H is s u b je ct
w ill b e “ T h e E c o n o m ic O u tlo o k in an
BOND
E le ctio n Y ea r.” F o llo w in g M r. W e id e n
b a u m w ill b e an ad dress b y B ill M o n
roe, W a s h in g to n ed itor, N B C T e le v is io n
N e tw o rk , w h o w ill discu ss “ B e y o n d
’ 7 6 , A m e rica ’s B est C e n tu ry .”
(C on tin u ed on page 86)
%
fr
G reetings to O ur Banker Friends
at This Convention Season
FROM THE OFFICERS AND DIRECTORS
OF THE SOUTH SIDE NATIONAL BANK
Officers
G E O R G E J . H ELEIN
President
W A LTER C . HAM M ERM EISTER
Vice President & Cashier
ALB IN F. O E H LE R
Vice President
RAYM O ND E. KNORPP
Vice President
W A LTER E. G O EB EL
Assistant Vice President
ROBERT C . W ERKM EISTER
Assistant Vice President
LEO N A . BREUNIG
Assistant Vice President
W IL LIA M E. M U H LKE
Asst. V .P. & Auditor
Herman J . Beetz
W alter E. Collins
Ralph Crancer, J r .
Howard F. Etling
C . J . Furrer, J r .
J . Richard Furrer
Thomas J . Heilek
George J . Helein
J . R IC H A R D FURRER
Executive Vice President
H. W M . ROBERT
Vice President & Trust O fficer
G E O R G E F. BENNER
Vice President
C A R O L S. ALEXA N D ER
Asst. Cashier & Sec'y to the Board
AR TH U R L. JE A N N E T , JR .
Assistant Cashier
VERN ON C . BETSCH ART
Assistant Cashier
M A R G U ER ITE C IB U L K A
Safe Deposit Officer
A L Y C E L. SCO TT
Personal Loan O fficer
JO S E P H E. M AG ER
Personal Loan O fficer
Directors
Paul V. Helein
Charles F. Herwig
Martin Schlitt
Edward C . Schneider
Edward Zeisler
RESOURCES OVER $90,000,000
S o u th
S id e
N a tio n a l
B an k
in
St.
L o u is
G RA N D AND G R A V O IS
ST. LOUIS, MISSOURI
Member Federal Deposit Insurance Corporation
%
é>
84
MID-CONTINENT BANKER for May 1, 1976
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
You’ll like Our New
Correspondent
O fficer
because
he know s
the business
outside in
and
inside out!
Meet John Jennings, another
Manchester Performance Man
Dn the move for you.
omeone who knows the business outside in, and out?
hat’s right. It’s the perfect combination of qualities for a
Manchester correspondent representative. Outside in . . .
John’s acclim ated and trained for correspondent services,
nside out . . . he came up through the cashier ranks
vith day-to-day staff operational and problem-solving
experience. Couple all that with his computer data
rocessing expertise and we think you'll see why
John Jen n in g s should be your man.
f yo u ’d like to discuss any of your correspondent needs
vith John, just give him a call collect at 314 • 652-1400.
FU LL
Manchester Bank
Vandeventer and Chouteau Avenues
St. Louis, Missouri 63110
MANCHESTER
FINANCIAL
BANKS
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
w
i t f a
i » c e
P ê
S E R V IC E
BAN K
M em ber F D IC
C liffo rd M . H a rd in , v ic e ch a irm an ,
R a lston P u rin a C o ., St. L ou is, w ill g iv e
th e first ad dress o f the s e c o n d business
session, w h ic h w ill b e g in at 9 :3 0 a.m .
T u e s d a y , M a y 18. O n h a n d to discu ss
th e t o p ic “ B a n k in g : T h e R ic h G e t
R ic h e r ” w ill b e H arry V . K e e fe , p re si
d en t, K e e fe , B ru yette & W o o d s , In c.,
N e w Y ork C ity.
F o llo w in g that session w ill b e a
lu n c h e o n w ith th e g o v e r n o r in th e M is
sou ri a n d M e ra m e c room s,
d u rin g
w h ic h M issou ri G o v e r n o r C h risto p h e r
S. B o n d w ill speak.
Harold McPheeters
OVER
John Buckley
Brooks Nlcklas
2 5 Y E A R S . . . at your service
. . . to aid in the development of sound PENSION or
PROFIT SHARING Planning for your bank.
Full no cost administration / IRA Plans.
For inform ation c o n ta c t:
THE McPHEETERS GROUP
Pension Planning
940 WESTPORT PLAZA
314 576-2443
86
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Suite 270
St. Louis, M issouri 63141
O n h a n d fo r th e final g en era l session,
M a y 18, w ill b e C y lv ia A . Sorkin , St.
L o u is e c o n o m is t a n d bu sin ess c o n s u lt
ant, w h o w ill ad d ress th e c o n v e n tio n
on “ It’s W h a t Y o u L e a rn A fte r Y o u
K n o w It A ll.” T h e “ U . S. Savings B o n d
P resen ta tion ” w ill b e g iv e n b y H arrison
E . C o e rv e r, A B A sa vings b o n d c o o r d i
n a tor an d M issou ri state b a n k in g ch a ir
m an. M r. C o e r v e r is p resid en t, M e rc a n
tile T ru st, St. L ou is. T h a t session also
w ill fea tu re Jam es J. L a n n in g , A B A
state v ic e p re sid e n t an d p resid en t, R e d
B rid g e B ank, K ansas C ity , w h o w ill
p re sid e o v e r th e m e e tin g o f M issou ri
m em b ers o f th e A B A .
A v a riety o f so cia l ev en ts is p la n n e d
fo r th e 1 9 7 6 c o n v e n tio n , b e g in n in g
w ith th e M B A co ck ta il p a rty fo r e x
h ib itors in th e E x h ib it H a ll at 4 :3 0 p .m .
M a y 16. A ll c o n v e n tio n registrants are
in vited .
T e e -o ff tim e fo r th e g o lf tou rn a m en t
w ill b e 8 a.m . M o n d a y , M a y 17, at the
G le n E c h o C o u n tr y C lu b , w h ile th e
tennis tou rn a m en t is slated to start at
9 o ’ c lo c k at th e W e s t C h este r T e n n is
C lu b . F r o m 9 to m id n ig h t M o n d a y w ill
b e th e “ G a la R iv e r b o a t P arty an d
D a n c e ” a b o a rd th e stea m er Admiral.
T h e re w ill b e an o p e n b a r a n d d a n c in g
to th e m u sic o f J oh n n y P olzin an d his
O rch estra , p lu s a d ix iela n d ja zz b a n d .
Sh u ttle b u ses w ill p r o v id e tra n sp orta
tion fro m S tou ffer’s m a in e n tra n ce to
th e le v e e b e g in n in g at 8 p .m .
T h e p r e s id e n t’ s co ck ta il p a rty is
MID-CONTINENT BANKER for May 1, 1976
W
h ile
th e
y o u 'r e
c o n v e n tio n ...
Jam es M . Kem per, Jr.
P. V. M iller, Jr.
Larry E. Lu m p e
Fred N . C o u ls o n , Jr.
John C . M e ssin a
G e o rg e W . Porter
P u t u s o n
m
a t
e e tin g
y o u r
lis t .
Look for these six men from Commerce Bank at this year's
convention. They help keep banks of all sizes up-to-date on
investments, new methods and systems, regulations, trends and
everything involved in the changing pace of banking today. Join
them at the Missouri Bankers Convention on May 16-18.
The m idwest's m ost experienced correspondent
JSP 1 C o m m e r c e Ba n k
™ t lo f K a n s a s C it y
"
— “
K*
M e m b e r F D IC
OF BANKING
816-234-2000
MID-CONTINENT BANKER for May 1, 1976
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
87
Our
correspondent
men
can approve
a loan...
slated fo r 6 p .m . T u e s d a y , M a y 18, in
the E x h ib it H a ll a n d th e E a st an d
W e s t A s s e m b ly areas o f S to u ffe r’s. F o l
lo w in g o n e h ou r later w ill b e th e p re si
d e n t’ s b a n q u e t in th e G ra n d B a llroom .
T h e in v o c a tio n w ill b e b y T h e R e v e r
e n d Joh n W . O tt, Pastor, H o ly C ross
L u th era n C h u rch , St. L o u is, an d d in n er
m u sic w ill b e b y R uss D a v id at the
p ia n o. F o llo w in g d in n er w ill b e th e
“ Spirit o f ’7 6 ” m u sica l v a rie ty sh o w
fe a tu rin g R uss D a v id an d his O rch e stra
w ith songstress B on n ie M u rra y. A ls o o n
h a n d to p r o v id e en terta in m en t w ill b e
M e tro p o lita n O p e ra Star R o b e rt M c F errin a n d S tory teller C h arles D in k
F reem a n .
A n u m b e r o f a ctivities fo r in v ite d
guests also h a v e b e e n p la n n e d fo r th e
M B A c o n v e n tio n . A t 9 :3 0 a.m ., M a y
17, w ill b e th e F irst M issou ri D e v e lo p
m en t C o rp . sto ck h o ld e rs’ m e e tin g in
th e St. L o u is R e g io n a l C o m m e r ce &
G ro w th A s so cia tio n O ffice in th e E q u i
ta b le B u ild in g . A t th e sa m e tim e, th e
sergean ts-a t-a rm s’ m e e tin g w ill c o m
m e n c e in th e H ic k o k R o o m o f S to u f
fe r ’s. T h e n o m in a tin g co m m itte e w ill
m e e t at 11 a.m . in A triu m “ A ,” L o b b y
L e v e l, w h ile th e Spirit o f St. L o u is
R o o m w ill b e th e site o f th e 5 0 -Y e a r
C lu b r e ce p tio n an d lu n c h e o n at 1 1 :3 0 .
O n T u e s d a y , M a y 18, the S c h o o l o f
B a n k in g o f th e S ou th alu m n i b rea k fa st
w ill b e g in in the L e w is R o o m at 7 :3 0 .
C o n v e n tio n co m m itte e ch a irm a n is
M r. O b e rm a n n an d D o n V . T h o m a s o n ,
sen ior v ic e p resid en t, U n ite d M issou ri
Bank, K ansas C ity , is co m m itte e v ic e
ch a irm a n . A lso serv in g on th e c o n v e n
tion co m m itte e are G e o r g e M . B a g g o tt,
assistant v ic e p resid en t, June D a r b y
E llison , p u b lic relations officer, an d
T h o m a s M . F itz g e ra ld , co rr e s p o n d e n t
b a n k in g officer, all o f M e rca n tile Trust,
St. L o u is ; John H . S. D ressel, p re si
d en t, G ra vois B ank, A ffto n ; a n d W e b e
H . N a u n h eim , ch a irm a n an d p re sid e n t,
C h a rter B ank, O verla n d .
O th e r
co m m itte e
ch a irm e n
are
J. R ich a rd F u rrer, e x e cu tiv e v ic e p re si
d en t, S ou th S ide N a tion a l, St. L o u is —
n o m in a tin g ; G e o r g e M . B a g g o tt— c o m
m ercia l ex h ib its; R osin a H u ck , m a n
ager, St. L o u is C le a rin g H o u se A s so
cia tio n — registra tion ; John H . S. D re s
sel— g o lf; a n d T h o m a s M . F itz g e ra ld —
tennis.
alone.
Richmond, A nderson and Lea
A re M BA Officer Nom inees
FIRST NATIONAL BANK
S t. Jo se p h , M issouri • 816-279-2721
Call Benton O’Neal • Ed Boos • Dale Maudlin • Macon Dudley
Affiliates of First Midwest Bancorp
88
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
MEMBER F.D.I.C.
A t its 1 9 7 6 m eetin g , th e M B A N o m i
n a tin g C o m m itte e n a m e d C h arles K.
R ich m o n d to run fo r p re sid e n t o f the
associa tion , M ills H . A n d e rs o n fo r v ic e
p re sid e n t and P at L e a fo r treasurer.
C o m m itte e m em b e rs in a tte n d a n ce at
th at
m e e tin g
w ere
its
ch a irm an ,
J. R ich a rd F u rrer, e x e cu tiv e v ic e p re si
d en t, S ou th S id e N a tion a l, St. L o u is;
MID-CONTINENT BANKER for M a y 1, 1976
G . Jack Jones Jr., p re sid e n t a n d C E O ,
C liffo rd
B a n k in g
C o .,
C larksville;
C h a rles B elsh e, sen ior v ic e p resid en t,
F irst N a tio n a l, G a lla tin ; Iv a n D . W il
son , v ic e p re sid e n t an d cash ier, F irst
State, K in g C ity ; R o b e r t V . P lu m m er,
v ic e p re sid e n t, C o lu m b ia U n io n N a
tiona l, K ansas C ity ;
L . D e lb e r t H a rp e r,
p r e s id e n t
and
CEO,
N a tio n a l
B ank o f C a ru th ersv ille ;
D a v id
C.
L e w is , v ic e p re si
d en t, B ank o f T a
b le
R ock
Lake,
R e e d s S p rin g ; an d
J. H e lm D a v id s o n ,
v ic e
p r e s id e n t ,
F irst B ank o f C o m
m e rce , C o lu m b ia .
M r. L e a , th e treasurer n o m in e e , is
ch a irm a n an d p re sid e n t, F irst N a tion a l,
Sikeston. H e b e g a n his b a n k in g ca reer
as a teller at F irst State, C o n w a y , A rk.,
in 1 9 5 3 . H e la ter w a s a ssocia ted w ith
F irst N a tio n a l, J o n e sb o ro , A rk ., a n d in
1 9 6 0 o r g a n iz e d a n d se rv e d as e x e cu tiv e
v ic e p re sid e n t, A rkansas V a lle y Bank,
D a rd a n e lle , A rk. M r. L e a th en w e n t
to B a n k o f Sikeston as e x e cu tiv e v ic e
p re sid e n t a n d w as n a m e d p re sid e n t an d
C E O o f F irst N a tion a l, S ikeston , in
1 9 7 1 . S in ce th at tim e, h e also has
se rv e d as p re sid e n t, State B ank, M o r e
h o u s e , a n d as a d ir e c to r o f F irst N a
tion a l, M a ld e n . H e has se rv e d in the
Junior Bankers S e ctio n an d is a fo rm e r
p re sid e n t o f th e S ou th ea st M issou ri
Bankers In stitu te. M r. L e a has b e e n on
the fa c u lty o f th e S c h o o l o f B a n k in g o f
th e S ou th , L o u isia n a State U n iv ersity ,
B aton R o u g e , fo r th e p a st tw o years.
C o n v e n t io n G r e e t in g s to th e
MISSOURI BANKERS ASSOCIATION
IT’S OUR
th
\
Anniversary
W e ’re a c o m m u n ity
b a n k . . . and p ro u d
o f the reliab le service
w e ’ ve p r o v id e d since
1 9 2 6 . W h en y o u ’ re
in t o w n , s to p b y to
see us.
A b o v e : O ur “ n e w b u ild in g ” in 1 9 2 9 c o s t $ 3 0 ,0 0 0 . . . w as la u d e d as o n e
o f th e m o s t b e a u tifu l in S t. L o u is C o u n ty . O ur cu rren t m ain b a n k b u ild in g
sits o n th e sam e fo u n d a t io n . . . still a h o m e t o w n b a n k .
...b ig g er to
serve you better
B AN K & TR U S T CO.
8924 St. Charles Road
St. Johns, Mo. 63114
New 50-Year Club Members
To Be Inducted M ay 17
T h e M B A 5 0 -Y e a r C lu b lu n ch e o n ,
w h ic h w ill b e h e ld M o n d a y , M a y 17,
at S to u ffe r’ s R iv e r fro n t In n in St. L o u is,
is s c h e d u le d to b e g in at 1 1 :3 0 a.m .
N e w a d d itio n s fro m th e St. L o u is
area in c lu d e S. H . W a m h o ff, N o r th
w e ste rn B a n k ; L e o n a r d J. S c h re w e ,
v ic e p re sid e n t, a n d R a lp h R u d o lp h ,
F irst N a tio n a l; a n d F r e d H . K ru se,
p re sid e n t (r e tir e d ) an d H . R . M e ck fessel, e x e cu tiv e v ic e p re sid e n t an d
se creta ry (r e t ir e d ), N o rth St. L ou is
Trust.
O th e r in d u cte e s w ill b e H e le n E .
R o lu fs , R o lla State; R o b e r t B row n Jr.,
sen ior v ic e p re sid e n t an d assistant trust
office r, an d Jam es H ic k e y , sen ior v ic e
p re sid e n t an d treasurer, W e b s te r G rov es
T ru st; Sam G . H in er, p re sid e n t an d
C E O , F arm ers State, C a m e ro n ; a n d
N a te L . Bassin, e x e cu tiv e v ic e p resi
d e n t, P e o p le s B ank, K ansas C ity.
MID-CONTINENT BANKER for May 1, 1976
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
O ur n ew M ini-B an k o p e n e d in N o v e m b e r
1 9 7 4 , p ro v id in g drive-in and w a lk -u p
service at 9 2 2 9 N atural B ridge.
89
Insured Pension Plans Can Take Sting Out of ERISA
N E O F T H E m ost c o m p le x p ie ce s
o f le g isla tio n e v e r e n a c te d b y C o n
gress b e c a m e la w in 1 9 7 4 — th e E m
p lo y e e R etire m e n t In c o m e S ecu rity A c t
( E R I S A ) . Bankers p r o b a b ly h a v e rea d
m u c h a b o u t this leg isla tion , b u t its fu ll
im p a c t w o n ’ t b e k n o w n fo r m a n y years.
W h a t is n o w k n o w n is that n u m erou s
n e w req u ire m e n ts h a v e b e e n a d d e d for
th e trustees, adm in istrators, e m p lo y e rs
an d th e in d u stry associa ted w ith q u a li
fie d p e n sio n plans. N a tu ra lly, a n u m -
By JO H N M. BUCKLEY
The M cPheeters Group
St. Louis
O
b e r o f th ese in d iv id u a ls w e re n ot, are
n ot an d c a n n o t b e c o m e k n o w le d g e a b le
a b o u t all th e n e w req u irem en ts o f this
la w . T h e re fo r e , m ost o f th ese p e o p le
w ill h a v e to seek ou tsid e a d v ic e an d
co u n se l to m a k e th eir plans c o n fo r m
w ith th e req u irem en ts.
T h e q u e stio n n o w is w h e th e r th e v e -
THE FLORISSANT COMMUNITY DEMANDS
MORE IN SERVICE . . .
and now w e're equipped to furnish it. O ur association with First
Union opens a whole new realm of service fo r our custom ers. They
deserve it, and now we can provide it!
M ELVYN M O E LLE R IN G , Chairm an & President
C Y R IL A . N IEH O F F, Executive Vice President & Cashier
NORBERT W . LO H E, Senior Vice President
D O RO TH Y R. JA S P E R , Assistant Vice
President
EM M A R. S C H O L L , Vice President
C A R L W . PETERS, Assistant Vice President
LESTER H . ROSENKO ETTER, Vice President
STEPHEN E. FRA N K, Assistant Cashier
ROY F. LA R A M IE, Vice President
RO SA N. SM ITH , Assistant Vice President
DO LO RES B IEBEL, Assistant Cashier
EU G E N E J . M EYER, Assistant Vice President
M ARY A . H O O K , Assistant Cashier
Florissant Bank
880 ST. FRANCOIS ST. & 13980 NEW HALLS FERRY RD.
W
fà
Hometown Banks
Statewide Strength
FLORISSANT, MO.
Member of Federal Deposit Insurance Corporation
314-921-5300
M AKE GOOD CUSTO M ERS BETTER C U STO M ERS!
Statistics sh o w b a n k cu stom ers use
less than tw o services. T h e y should use
m o r e . . . bu t w h a t d o y o u d o ? C a ll
G u ild A s so cia te s and let “ C ross S ell
in g” experts sh o w y o u h o w to pull
m ore business fr o m present cu stom ers!
W e d o ads, co m m e r cia ls an d p r o m o
tion a l p ro g ra m s f o r fin an cial institu-
tions. But, w e ’re o n e m a rk etin g a g en
c y that puts selling ahead o f adver
tising! W e ’ve g ot sam ples to sh ow ,
ideas to share . . . all b a ck e d b y m o re
than 15 years ex p e rie n ce and service
to so m e o f the M id w e s t’ s fastest g r o w
in g ba nks. W e ’ d like to help y o u .
Write, wire . . . o r call us c o lle c t
Guild Associates, ln c.,inancj^;™*etins
23 N o rth G o r e A v e n u e • St. L o u is , M o . 6 3 1 1 9
(3 1 4 ) 961 -4 5 6 7
90
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Federal Reserve Bank of St. Louis
•
h i d e u s e d to p r o v id e th e fu n d in g o f
th eir p la n ca n also p r o v id e th e a c
tuarial a n d ad m in istra tive serv ices n e c
essary to c o m p ly w ith the la w . I f th e y
can , w h a t w ill b e the c o st o n an an
nual an d c o n tin u in g b a sis? In a d d itio n ,
th ere is alw a ys th e q u estion o f w h e th e r
th e c o st fo r th ese serv ices is rea son a b le.
N o n -in s u re d p la n ad m in istra tive costs
w ill in crea se in th e fu tu re b e c a u s e th e
ex p en se o f m e e tin g th e actu arial re
q u irem en ts w ill in crea se d u e to th e
n ecessity o f n e w r e p o rt fo rm s, m a in
ta in in g a c cu ra te re co rd s a n d in cre a se d
co m p e n s a tio n to actu aries fo r c e rtify in g
th e p la n as an “ e n ro lle d a ctu a ry .” In
this area o f ad m in istra tive e x p e n se , a
fu lly in su red p en sio n p la n u tilizin g life
in su ra n ce p o licie s in m o s t cases w ill
h a v e a d efin ite a d v a n ta g e o v e r a n o n
in su red or tru steed p la n , p a rticu la rly
w h e r e th e trustees are n ot pa rt o f a
n ation a l orga n iza tion .
In su red pla ns are fu n d e d b y insur
a n ce co m p a n ie s that g e n e ra lly are la rg e
n ation a l
orga n iz a tion s
w ith
siza b le
g rou p s o f b a ck -u p p e o p le w ith th e e x
pertise n ecessa ry to h a n d le q u a lifie d
p e n sio n plans. In a d d ition , th e y are also
in v o lv e d on a d a ily basis w ith th e re
q u irem en ts o f th e la w .
F u rth er, th e y h a v e th e a d v a n ta g e o f
b e in g a b le to u tilize e co n o m ie s o f scale.
T h a t is, an in su ra n ce c o m p a n y w ith
o v e r 2 0 ,0 0 0 p en sion pla n s in fo r c e is
b e tte r a b le to p r o v id e serv ices at a
n om in a l fe e (o r n o f e e ) th an a lo c a l
tru stee w ith 5 0 0 pla ns or less. A n a
tion a l in su ra n ce c o m p a n y w o u ld b e
m o re a p t to h a v e in d iv id u a l sp ecia lists
in p a rticu la r section s o f th e la w w h o
are cu rren t in all aspects w ith in their
s c o p e o f exp ertise, than w o u ld a re
g ion a l or lo ca l g ro u p s u p p o s e d ly p r o
v id in g th e sam e services. T h e re fo r e , it
ca n b e e x p e c t e d that th e serv ices p r o
v id e d b y a la rg e in su rer w o u ld , first o f
all, b e m o re a p t to b e c o m p le t e an d
cu rren t and, se c o n d ly , w o u ld m o s t lik e
ly b e on a lo w e r u n it-co s t basis (o r a
n o -c o s t b a sis) in m ost cases.
T h e re are a f e w oth e r m a jo r areas
w h e r e the in su red p e n s io n p la n a u to
m a tica lly co m p lie s w ith E R IS A , th e re
b y a v o id in g m a n y co stly serv ice s n e c e s
sary fo r th e n o n -in s u re d pla n.
I f a p la n is fu n d e d e x clu siv e ly w ith
th e p u rch a se o f in d iv id u a l in su ra n ce
con tra cts th at p r o v id e g u a ra n te e d b e n
efits, as lo n g as th e p rem iu m s are p a id
a n d th ere are n o loa ns o u tsta n d in g on
th e p o licie s , th e p la n is d e e m e d to b e
an in su ra n ce co n tra ct pla n. T h e a d
v a n ta g e is th at th ere is an a u to m a tic
e x e m p tio n fro m th e in trica te c a lc u la
tion s r e q u ire d to d eterm in e th e m in i-
M1D-CONTINENT BANKER for May 1, 1976
All correspondent bankers
are friendly...
It’s Experience that makes Us different
Any bank that offers correspondent services will
quickly tell you how friendly their correspondent
bankers are. If you’ve met Don Folks or Larry Morrow
from American National in St. Joseph you know
they’re friendly, too. You should also know they’ve
got a lot more than friendliness going for them.
T h ey’ve got years of solid banking experience.
About 31 years between the two of them. Their
friendliness is backed by that experience plus their
ingenuity, responsiveness, and a w illingness to be
of service. So, when you’re looking for a corre
spondent banker, choose a friendly one, sure, but
one also with e xp e rien ce. . . call Don or Larry at
American National in St. Joseph, Missouri.
A m e rica n N ational Bank
6th & Francis Streets
St. Joseph, Missouri
816/233-6141
Member FDIC
MID-CONTINENT BANKER for May 1, 1976
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
9I
FUNDS AVAILABLE FOR
LONG TERM CORPORATE
BUSINESS FINANCING
FIRST MISSOURI LOAN POOL
Loan Participations
Working Capital
Equipment
Construction
Acquisitions
Sale Leaseback
Financial Counseling
A n in su ra n ce co n tra ct p la n also d e
rives sign ifica n t a d va n ta g es in the a c
c r u e d b e n e fit area. A n in su red pla n
m a y e q u a te the a c c r u e d b e n e fit o f e a ch
p a rticip a n t to th e cash v a lu e o f th e
con tra cts o n e a c h p a rticip a n t. T h e a d
v a n ta g e is th at th e a c c r u e d b e n e fit o f
e a ch p a rticip a n t is easily d e te rm in e d b y
th e cash v a lu e an d n e e d n o t b e d e
term in ed th ro u g h a n oth er in trica te se
ries o f ca lcu la tion s w h ich w ill p r o v e
co s tly to p e rfo rm . A g a in , this sa vings o f
e x p en s iv e tim e an d e ffort e a c h y ea r can
p r o d u c e sign ifican t sa vings o v e r the life
o f a plan.
$25,000 to $500,000
5 to 15 years
JERRY STEGALL, E.V.P.
302 Adams St.
P.O. Box 252
Jefferson City,
Mo. 65101
314-635-0138
ìsso^
I
m
For taster
se rvic e on
BANK
CREDIT
INSURANCE
CALL THESE SPECIALISTS
Harold E. B all • Carl W. Buttenschon
Leon Robinson • M ilto n G. Scarbrough
214/748-9261
(§)
Foster (Horsey) Latim er
M issouri General Agent
INDUSTRIAL
LIFE INSURANCE COMPANY
2808 Fairm ount — Dallas, Texas 75201
m u m fu n d in g stan dard a cco u n t. T h e se
ca lcu la tion s are o u tlin e d in section
4 1 2 ( b ) o f th e leg isla tion . A r e v ie w
o f th ese req u irem en ts sh ou ld in d ica te
th at th e ca lcu la tion s in v o lv e d in a m in i
m u m fu n d in g sta n d a rd a c c o u n t are in
d e e d le n g th y an d w ill b e e x p e n s iv e to
p e rfo rm b y an in d e p e n d e n t actu ary.
H o w e v e r , a p la n w h ich is d e e m e d to b e
an in su ra n ce co n tra ct p la n is a u tom a ti
c a lly e x e m p te d fro m th e req u ire m e n t
o f p e r fo rm in g these ca lcu la tion s. T h e r e
fo r e , in su ra n ce co n tra ct plans w ill n ot
r e q u ire th e a d d itio n a l ca lcu la tion s to b e
d o n e an n ually, h e n c e a savings ca n b e
e x p e c t e d o v e r the life o f th e pla n.
.
T h e leg isla tion ch a rg es th e trustees
or oth er fid u cia ries resp o n sib le fo r in
v e stin g p la n assets to d o so in a c c o r d
a n ce w ith a p ru d e n t-m a n stan dard.
M o re o v e r, E R IS A has p rovision s in it
fo r d is g ru n tled e m p lo y e e s a n d their
b en eficia ries
to b r in g le g a l a ction s
against fid u cia ries a n d trustees w h o d o
n o t p e r fo rm th eir o b lig a tio n s in a c c o r d
a n ce w ith la w . B a sed on this, it is easy
to see th at if th e trustees d o n ot p r o
v id e the fu n d s a d e q u a te to fu n d th e
b en efits u n d e r a p a rticu la r p la n , it is
n o t u n rea son a b le to e x p e ct that pla n
p a rticip a n ts a n d b en eficia ries w o u ld
b r in g le g a l action s against th e trustees
a n d fidu ciaries.
JOHN W. RIDGEWAY
AND ASSOCIATES
Banking Consultants
and Auditors
Over 35 years experience in
Banking, Examining,
Supervision
Contact us for
Independent Audits
Bank Appraisals
Bank Sales Assistance
Feasibility Surveys
909 Missouri Boulevard
Jefferson City, Mo. 65101
314-635-6020
H o w e v e r , if a pla n w e re fu n d e d e x
c lu s iv e ly w ith in su ra n ce con tra cts that
p r o v id e th e b en efits on a g u a ra n teed
basis, it is h ig h ly u n lik ely th at an y plan
p a rticip a n t c o u ld file a suit a gainst th e
fid u cia ries o f the pla n. T h e re fo r e , in
this d a y an d a g e o f h ig h m a lp ra ctice
an d errors a n d om ission s suits, it w o u ld
a p p ea r to b e a d v a n ta g eou s to fu n d a
p en sion p la n w ith in su ra n ce con tra cts
th at p r o v id e g u a ra n teed b en efits e q u a l
to the b en efits p r o v id e d u n d e r th e plan.
L a stly, th ere is a sign ifican t a d v a n
ta g e to in su red pla ns w h ic h has n ot
c h a n g e d w ith th e a d v e n t o f E R IS A .
T h is is th e a d v a n ta g e o f h a v in g g u a r
a n te e d an n u ity rates at retirem en t
w h ic h are k n o w n at th e in ce p tio n d a te
o f th e p la n a n d o v e r th e life tim e o f the
FIRST NATIONAL BANK
A member company of
p e n sio n plan. T h a t is, th e in su red pla n
8. TRUST COMPANY OF IOPLIN
Republic Financial Services. Inc
is a b le to gu a ra n tee th e e m p lo y e r , b e n
Downtown/Southtown/Westown/Member FDIC
Member. First Community Bancorporation
eficiary, p a rticip a n t a n d tru stee e x a ctly
92
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Federal Reserve Bank of St. Louis
MID*
BANKER for May 1, 1976
MUNICIPAL BONDS
TAX EXEMPTION
The major attraction of state and municipal bonds is their ex
emption from the federal income tax. W hile income from cor
porate and other securities is subject to federal income taxes
ranging up to 70% , the interest on municipal bonds enjoys com
plete exemption from these levies. This means that each dollar
of income from municipal bonds is spendable— not just the re
mainder after the tax collector takes his due. Speculators are
not attracted to these securities because of this stable base.
K . R. A D A M S, Chairman of Board
JACK L. PERRY, President
NORMAN E. LEWIS, Vice-President, Secretary-Treasurer
ROBERT P. MILLER, Vice-President
G A R Y E. GREER, Vice-President
J. MICHAEL N AU M AN , Vice-President
NELLIE M. SHIPMAN, Cashier
K AR EN V A N VOORHEES, Asst. Cashier
MICHAEL G. M cM AHON
PERRY, ADAMS & LEWIS SECURITIES, INC
1012Baltimore Ave. / Kansas City. Missouri 64105
Investment Bankers
MID-CONTINENT BANKER for May 1, 1976
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Phone 816/221-4090
93
w h a t th e c o s t to p r o v id e his re tirem en t
b en efit w ill b e at the tim e th e p la n is
in stalled.
Our 85th Year Serving South St. Louis
SOUTHERN
COMMERCIAL
BANK
5515 SO UTH GRA N D BLVD.
7201 SOUTH BROADWAY
ST. L O U IS , M IS S O U R I
Convenience Banking in St. Louis Since 1891
3 1 4 /4 8 1 -6 8 0 0
M em ber F .D .I.C .
In an y oth e r k in d o f p la n w h e r e an
n u ity gu a ra n tees are n ot in v o lv e d , this
fa c to r is n o t r e s o lv e d until th e actu al
tim e o f retirem en t. T h e re fo r e , u n til that
tim e, th e true c o s t o f p r o v id in g b en efits
to p a rticip a n ts a n d th eir b en e ficia rie s is
n ever k n o w n until th e b en efits are u lti
m a tely p a y a b le . T h e re fo r e , th e re is
d efin itely an e le m e n t o f se cu rity a n d
p r e d ic ta b ility in v o lv e d in an in su red
p la n th at is n o t p resen t in a tru steed
p la n fu n d e d w ith oth e r than insur
a n ce con tra cts. * *
■ B O B R O W E has jo in e d B o a tm e n ’s
N a tion a l o f N orth St. L o u is C o u n ty as
a b u siness d e v e lo p m e n t rep resen ta tive.
M r. R o w e is a d e fe n s iv e ta ck le w ith the
St. L o u is F o o tb a ll C a rdina ls.
CONVENTION GREETINGS FROM YOUR FRIENDS A T . .
10449 St. Charles Rock Road
St. Ann, Missouri 63074
next to St. Louis International Airport
M O ELLERING
TO TA L R E S O U R C E S M ORE THAN $27,000,000
Twenty-two Years of Service to St. Ann
CITIZENS BANK
OF GRANT CITY
GRANT CITY, MO.
m M ELVYN
We're looking forward to
seeing our friends at
the MBA convention in
St. Louis, May 16-18.
W. M. C. DAWSON
Chairman
. . . with more than 95 years of
banking service.
JOHN P. DAWSON
President
ROW E
M O E L L E R IN G ,
ch a ir
m an a n d p resid en t, F lorissan t Bank,
w as o n e o f fiv e n om in ees fr o m St. L o u is
C o u n ty fo r “ ou tsta n d in g St. L o u is
C o u n ty b u siness p erson o f th e y e a r.”
T h e a w a rd w a s s p o n s o re d b y th e St.
L o u is C o u n ty L e a g u e o f C h a m b e rs, an d
M r. M o e lle r in g ’ s n a m e w as su b m itte d
b y the F lorissan t V a lle y C h a m b e r o f
C o m m e r ce . H e jo in e d F lorissan t B ank
4 0 years a g o a n d w a s e le c te d to his
p resen t posts in 1 9 5 6 . M r. M o e lle r in g
r e c e iv e d th e “ m an o f th e y e a r a w a rd ”
fro m th e F lorissan t Junior C h a m b e r o f
C o m m e r c e in 19 61 a n d w as n a m e d
“ m a n o f th e y e a r” b y th e B usiness &
P rofession a l W o m e n o f F lorissan t in
1 9 7 1 . H e is ch a irm a n o f th e b o a r d o f
C hristian H osp ita l N orth w e s t, w h ic h
has tw o fa cilities— C h ristian H osp ita l
N o rth w e s t in F lorissan t a n d C h ristian
H osp ita l N orth ea st in n orth St. L o u is
C o u n ty .
■ H A R L A N L . E V E R E T T II I has
b e e n e le c te d assistant d ir e c to r o f p u b
lic relations a n d a d vertisin g at U n ite d
M issou ri B ancsh ares, In c., K ansas C ity .
H e jo in e d th e H C in 1 9 74 .
M cCO U RTN EY-BRECKEN RID GE & COM PANY
INVESTMENT SECURITIES
SAINT LOUIS, MISSOURI 63102
PHONE 314/231-5730
94
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
314 N. BROADWAY
■ G E O R G E L . H I L L E R has b e e n
n a m e d an in tern a tion a l b a n k in g o fficer
at C o m m e r c e B ank, K ansas C ity . H e
fo r m e rly w as an in tern a tion a l b a n k in g
rep resen ta tive.
MID-CONTINENT BANKER for May 1, 1976
“Confidence com es
ith County National.”
x
St. Louis County National Bank in
Clayton is the largest bank in
the County . . . 4th largest in all of
St. Louis.
This is the lead bank in County
National Bancorporation . . . a group
of four banks now looking to the
future with an eye on further
expansion.
Today, many banks place their
emphasis on promotional type
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
X
a
services. But County National
believes that thoughtful professional
services come first with people who
are really concerned about financial
matters. Security, reliability,
integrity. Those three words guide
our people and our policies.
That's the kind of a bank we've
always been. The kind of a bank we'll
always be.
The Thoughtful Banking Bank
—in Clayton.
SI LOUIS
COUNTY
NATIONAL
BANK
M ain Bank: 8 000 F orsyth
M in i-B ank: 7520 F orsyth
Clayton. M issouri
■ B E N A . P A R N E L L JR. has b e e n
n a m e d in terim p re sid e n t a n d C E O o f
B a n k o f S p rin g field . H e cu rren tly is
ch a irm a n o f the b a n k a n d o f P eop les
B ank, B ran son , B ank o f C ran e an d
B ank o f K im b e rlin g C ity a n d is a past
p re sid e n t o f th e M issou ri B ankers A s
socia tion . A t S p rin g field , M r. P arn ell
s u c ce e d s C h arles L ea r, w h o w e n t to
F irst N a tion a l, H u tch in so n , K an ., as
e x e cu tiv e v ic e p resid en t.
n a m e d co m p tr o lle r tw o years later. A t
th e b a n k ’ s affiliate PIC, C o u n ty N a tio n
al B a n co rp ., C la y to n , R o b e r t C . W o l
fo r d , e x e cu tiv e v ic e p re sid e n t o f the
b a n k , has b e e n e le c te d a d ire cto r. H e
jo in e d th e b a n k in 1 9 7 4 .
ABELN
■ L A W R E N C E D . A B E L N has b e e n
a p p o in te d v ic e p re sid e n t an d c o m p tr o l
ler o f St. L o u is C o u n ty N a tion a l, C la y
ton. In a d d itio n , h e has assu m ed re-
PARNELL
sp on sib ility fo r da ta p roces sin g , o p e r a
tions a n d ca sh ier d ep a rtm en ts. M r.
A b e ln jo in e d th e b a n k in 1 9 7 0 a n d w as
B M A R V I N L . K IR K P A T R I C K , ex
e c u t iv e v ic e p resid en t, has retire d fro m
B ank o f G a in esv ille. S u c c e e d in g h im
w ith th e title o f v ic e p re sid e n t is R o y
Jones, fo r m e rly o f B a n k o f B o u rb o n .
M r. K irk p a trick jo in e d the b a n k in
1 9 4 8 an d w as n a m e d cash ier in 1 9 5 5 ,
a p o s t h e h e ld u n til his p r o m o tio n to
e x e cu tiv e v ic e p re sid e n t last January.
■ L A W R E N C E F . S T E IN has b e e n
n a m e d assistant v ic e p re sid e n t at C h ip
p e w a T rust, St. L o u is, an d m a n a g e r o f
th e b a n k ’s fa c ility at 5 4 4 0 G ra vois. H e
g o e s th ere fr o m
C on tin en ta l Bank,
R ich m o n d H eig h ts, w h e r e h e se rv e d as
v ic e p resid en t.
Exclusively
Municipal Bonds
■ E D G A R M . R A T L I F F , fo r m e rly
v ic e p re sid e n t a n d in stallm en t lo a n d e
p a rtm en t m a n a ger, F o rt M a d is o n ( la .)
B ank, has jo in e d C o m m e r cia l Bank,
L e x in g to n , as v ic e p resid en t. H e h a d
b e e n w ith his fo r m e r b a n k sin ce 1 9 55 .
Spenalizing in
N ew Bank Planned
A LL G EN ER A L M A RKET BO N DS
Your "Correspondent” for Municipal Bonds
Investment Bankers • Municipal Bonds
ONE TWENTY SEVEN WEST TENTH
KANSAS CITY, MISSOURI 64105
(8 1 6 )
96
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
221-4311
ST. LOUIS— Application has been
filed for a state charter for the pro
posed Manchester Bank of W est
County, which would be located in
a free-standing building in a 25-acre
shopping center being developed on
Dorsett Road. Capital and surplus
would be $500,000 each and undi
vided profits, $200,000.
If the charter is approved, the
bank would be owned by Manches
ter Financial Corp., St. Louis-based
HC, which owns Manchester Bank
of St. Louis and National Bank of
Affton. W . C. Johns would be presi
dent and Ronald K. Hammelman,
vice president. Mr. Johns now is
senior vice president and chief lend
ing officer, Manchester Bank of St.
Louis, where Mr. Hammelman is
commercial loan officer.
The new bank would offer all ser
vices, including drive-up facilities.
The shopping center in which it
would be located is to have about
40-50 stores, anchored by a Schnuck’s
supermarket. Bank organizers hope
to open it early next spring. In ad
dition to Messrs. Johns and Ham
melman, they include: Newell A.
Baker, president, Streett Industries;
Harry A. Baumstark, who is in real
estate investments; John W . Martin,
chairman, Manchester Bank of St.
Louis and the HC; George H. Pfister, president of that bank and HC;
and Daniel F. Sheehan Sr., chairman
and CEO, Dolan Co.
MID-CONTINENT BANKER for May 1, 1976
First Mo. Development
Commits $5 Million
To Businesses in State
JE FFERSO N
C I T Y — Jerry
Stegall,
e x e cu tiv e v ic e p re sid e n t, F irst M issou ri
D e v e lo p m e n t F in a n c e C o r p ., has an
n o u n c e d th a t total sto ck so ld as o f last
D e c e m b e r 3 1 a m o u n te d to $ 5 0 0 ,2 5 0 ,
o v e r th e h a lfw a y m a rk in th e 1 0 ,0 0 0
shares F irst M issou ri is a u th o rize d to
sell b y th e state legislatu re. O f this
a m ou n t, $ 7 3 ,7 5 0 w a s sold in 1 9 7 5 to
4 4 n e w sh a reh old ers, b r in g in g th e total
n u m b e r o f sh a reh old ers to 152.
F irst M isso u ri is a p riv a te le n d in g
org a n iz a tio n cre a te d to p r o v id e fin a n c
in g fo r M iss o u ri bu sin esses u n a b le to
g e t fu n d s th ro u g h re gu la r ch a n n els. It
is fu n d e d b y 19 8 M isso u ri ba n k s, the
m e m b e rs o f th e c o rp o r a tio n a n d b y its
sh a reh old ers.
T o ta l lin e o f c re d it p le d g e d b y First
M issou ri m e m b e r ba nk s stands at $ 4 .9
m illion . O f this a m ou n t, $ 3 4 4 ,5 0 0 w as
p le d g e d b y th e m e m b e rs g a in e d d u rin g
1 9 7 5 . In terest p a id to m e m b e r banks
last y e a r w a s $ 2 4 1 ,3 9 7 .
A s o f D e c e m b e r 3 1 , total loa n c o m
m itm e n t s to o d at $ 5 .8 m illion , alm ost
$1 m illio n m o re th an a y ea r earlier.
T o ta l loa n s o u tsta n d in g w e re $ 3 .8 m il
lion .
A c c o r d in g to M r. Stegall, loa ns m a d e
b y F irst M isso u ri h a v e p r o v id e d m ore
th an 4 ,0 0 0 jo b s th r o u g h o u t th e state
sin ce th e c o rp o r a tio n ’ s in ce p tio n in
1968.
A m o n g n e w in vestm en ts fo r First
M issou ri are loa n s to a pla stics firm , a
sanitation se rv ice , a w o o d cra ft b u s i
ness an d a lu m b e r firm. T h e loa ns h a v e
b e e n sp re a d th r o u g h o u t th e state, M r.
Stega ll said.
The officers and staff of Pioneer Bank & Trust Co.
invite you to visit our headquarters building at 2211 S. Big Bend, St. Louis, Missouri.
The following officers of Pioneer Bank & Trust Company w ill welcome your queries
about banking services for both consumer and industrial accounts throughout W est and
South St. Louis County.
W IL LIA M T. BOEHM
Chairman o f the Board and President
ERNEST A . COE
Exec. Vice President
L. M . M AR SH ALL
PETER F. BENOIST
Asst. Vice President
Sr. Vice President
PHYLLIS W . HILL
DON W . GARNER
Asst. Vice President
Vice President
Asst. Secretary
EVELYN M. C A L L A W A Y
Asst. Treasurer
THO M AS J POWERS
Vice President and Trust Officer
SAM UEL H. G O LD M AN
Vice President
ROBERT G. SNYDER
Vice President
E. TR A C Y BECKETTE
WINEFRED E. CORDER
Asst. Treasurer
Asst. Vice President
Auditor
JEAN PETTIBONE
Drive-In Manager
JOAN S. JACOBS
Assets Now
in Excess of
$53,000,000.00
PIONEER BANK & TRUST CO.
2211 S. Big Bend
644-6600
St. Louis, Mo. 63117
Member F D IC
D u e to a ch a n g e m a d e re ce n tly in
u su ry la w s, F irst M isso u ri has m a d e its
first loa n to a p r o p rie to rsh ip ty p e o f
bu siness. T h e c o rp o r a tio n has th ree
loans p e n d in g a m o u n tin g to a b o u t
$ 6 2 6 ,0 0 0 . A b o u t $ 7 0 0 ,0 0 0 in a d d itio n
al loans w a s fa v o r a b ly c o n s id e r e d last
y ea r b u t n o t g ra n ted.
MISSOURI'S FIRST STATE CAPITOL
VISIT the
City of Saint Charles, Missouri
Pfleging To H ead HC
H O M E O F M IS S O U R I'S FIR ST S T A T E C A P IT O L
ST. ANN— An agreement in
principal has been reached between
the Charles F. Vatterott family and
Richard J. Pfleging, president, bank
of St. Ann, for sale of controlling
interest in the bank to a one-bank
HC to be headed by Mr. Pfleging.
Regulatory approval is pending.
Mr. Pfleging joined the bank in
1964 and was named president and
a director one year later. He is
president of the Missouri Rankers
Association.
F ir
N
st
ESTABL I SHED
18 6 3
a t i o n a l
Ba n k J
S t .C h a r l e s
MISSOURI
NORTH MAIN, 5th AND FIRST CAPITAL
ELM AND HAWTHORNE
100
vV -
MID-CONTINENT BANKER for May 1, 1976
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
97
Charles Rice,
a banker's banker.
Correspondent Bankers
Lee D aniel
C harles
M cN am ara
B ill H e lle n
98
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Federal Reserve Bank of St. Louis
C harles R ice heads our correspondent banking department.
H e ’s one of five who can turn on the expertise, facilities and
resources of B ank of Oklahom a for you.
Call him, and find out how your financial needs fit into our
cap ab ilities—fast.
( 918 ) 584-3411
BANK OF OKLAHOMA
P.O. Box 2300 / Tulsa, Oklahoma 74192
MID-CONTINENT BANKER f o r May 1, 1976
Oklahoma Convention
President
O k la h o m a C ity , M a y
11-13
H ead q u arters—Skirvin P la za Hotel
PROGRAM
FIRST SESSION , 9 a .m ., M ay 12
Call to Order— T R A C Y K E L L Y , p resid en t, O k la h o m a Bankers A s
socia tion , an d p resid en t an d ch a irm an , A m erica n N a tion a l, B ristow ,
a n d ch a irm a n , C itizen s State, O k em a h .
KELLY
O BA pres. Tracy Kelly is pres. & ch., Am erican
N at'l, Bristow, and ch., Citizens State,
O kem ah. He is dir. & tre a s., M id-Am erica
Autom ated C learing House A ssn ., K an sas
City, and serves on the U. S. Sm all Business
Adm inistration's advisory council.
Introduction of N ew 50-Year Club Mem bers.
Address— R O B E R T L . P A R K E R o f P arker D rillin g C o ., T u lsa .
Address— D A V I D B O R E N , g o v e r n o r o f O k la h om a .
President’s M essage— T R A C Y K E L L Y .
President-Elect
Presentation of Service Awards.
Adjournment.
SECO N D SESSION , 9 a.m ., M ay 13
Call to Order— T R A C Y K E L L Y .
A d d re s s— “ A n U p d a te o n L oa n s an d M e m b e rsh ip o f th e O k la h om a
B usiness D e v e lo p m e n t C o r p .” — F R A N K G . K L I E W E R JR., p re si
d en t, C o r d e ll N a tion a l.
M O O RE
Serving as O BA pres.-elect is Pat Moore, pres.,
Am erican State, Thom as. He entered banking
at First N at'l, Clinton, joining his
present bank in 1958. Mr. Moore also is ch.,
First State, Keyes, and is a gradu ate and
regent of the Stonier G ra d u ate
School of Banking at Rutgers University.
M eeting of A B A Mem bership— P H IL IP C . K ID D JR., p resid en t, F irst
N a tion a l, N orm a n .
A d d re s s— J U D G E W I L L I A M J. H O L L O W A Y .
Installation of N ew President.
Installation of N ew Chairman.
Message of N ew President— P A T M O O R E , p resid en t, A m e rica n State,
T h om as.
Election of N ew President-Elect and Treasurer.
Treasurer
Adjournment.
C onventio n S p e a k e rs
HAN N AH
John T. H annah, pres. & ch.. City Bank,
M uskogee, is O B A treas. He helped organize his
ban k in 1973 and form erly w a s v.p., First Nat'l,
M uskogee, w hich he joined in 1940. Mr.
H annah is a form er v. ch.. State Planning &
Resources Board, and chairs O B A 's Group Three.
MID-CONTINENT BANKER for May 1, 1976
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
KLIEW ER
KIDD
99
■ S T O C K Y A R D S B A N K , O k la h o m a
C ity , has p r o m o te d th e fo llo w in g : W il
P ip p in , to p erson a l b a n k in g o fficer;
R o b e rt T . L u ttrell III, to co m m e r cia l
officer; a n d P at E n g la n d , to loa n a d
m in istration officer.
IRS, E S O P s To Be W orkshop Topics
A t O klahom a Convention M a y 11-13
in
O k la h o m a C ity is s c h e d u le d to h ost
this y e a r’s c o n v e n tio n o f th e O k la h om a
B ankers A s so cia tio n M a y 1 1 -1 3 . F e a
tures o f th e e v e n t w ill b e w ork s h op s
c o v e r in g E m p lo y e e S to ck O p tio n Plans
( E S O P s ) , th e IR S , th e U n ifo rm P r o
b a te C o d e , E F T S an d g ov e rn m e n ta l re
lations.
P rior to th e co n v e n tio n , on M o n d a y ,
M a y 10, w ill b e th e p a st p resid en ts’
d in n e r at 7 p .m . at th e P etro le u m C lu b .
A r ch ie L e w is o f Ja m a ica is sla ted to
en tertain, an d all p a st O B A p resid en ts
are in v ite d .
R eg istra tion an d exh ib its w ill o p e n
at 8 a.m . M a y 11. A lso p la n n e d fo r 8
o ’ c lo c k are th e g o lf a n d tennis tou rn a
m en ts. T h e g o lf tou rn a m en t w ill b e
h e ld at th e G reen s, w h ile n o site fo r
th e tennis to u rn e y h a d b e e n set at press
tim e.
F ro m 2 -4 p .m . T u e s d a y , w o rk s h o p s
w ill b e h e ld . “ W h e n IR S C alls” an d
“ E S O P s ” are pa rt o f th e O B A p ro g ra m
a n d th e “ U n ifo rm P ro b a te C o d e ” w o r k
sh o p , w h ich w ill b e h e ld tw ic e that
a fte rn o o n , is p la n n e d as part o f an o n
g o in g T ru st D iv is io n p rogra m .
T h e T ru st D iv isio n p ro g ra m w ill b e
gin at 1 1 :3 0 a.m . w ith a lu n ch e o n , d u r
in g w h ic h Jam es D . W h ite , e x e cu tiv e
v ic e p re sid e n t, L in c o ln F irst Bank,
R o ch e ste r, N . Y ., w ill d iscu ss con flicts
o f interest. A fte r lu n ch , th e w ork s h op s
w ill c o m m e n c e .
A t 7 p .m ., th e e v e n in g even ts w ill
b e g in w ith a socia l h ou r, fo llo w e d at
8 o ’ c lo c k b y th e T ru st D iv isio n din n er.
O n h a n d to p r o v id e th e a fter-d in n er
s p e e ch w ill b e W illia m J. C o p e la n d ,
v ic e ch a irm a n , P ittsb u rg h N a tion al. A ll
a tte n d in g th e c o n v e n tio n are in vited .
W e d n e s d a y ’s sch e d u le w ill b e g in
w ith th ree co n cu rre n t break fa sts at 7
a .m .: th e S ton ier G ra d u a te S ch o o l o f
B a n k in g, th e O B A 5 0 -Y ea r C lu b and
th e
N a tion al
A sso cia tio n
of
B ankW om en.
h e
T
s k ir v in
p l a za
h o t e l
R e g istra tion an d exhibits w ill op e n
at 8 o ’c lo c k W e d n e s d a y , fo llo w e d on e
h o u r later b y th e first bu sin ess session.
O n h a n d to ad dress th e O B A c o n v e n
tion w ill b e R o b e rt L . P arker o f Parker
D rillin g C o ., T u lsa , an d State G o v e r n o r
D a v id B oren .
A t n o o n , a r e ce p tio n an d d e le g a te s ’
lu n c h e o n is p la n n e d , w h ile tw o w o r k
sh op s, “ A u to m a tio n : E F T S ” an d “ G o v
ern m en ta l R e la tio n s,” are set to b e g in
at 2 p .m .
d in n er en terta in m en t w ill b e A rch ie
L e w is o f Ja m a ica a n d M o r e y A m ster
da m .
T h u rsd a y ,
M ay
13, th e c o n v e n
tio n ’ s final d a y , w ill b e g in w ith the
o p e n in g o f exh ib its at 8 a.m . T h e y w ill
b e o n d is p la y u n til n o o n .
T h e s e c o n d bu sin ess session w ill b e
ca lle d to o rd e r at 9 a.m . an d w ill fe a
ture “ A n U p d a te o n L oa n s an d M e m
b e rsh ip o f th e O k la h om a Business D e
v e lo p m e n t C o r p .” b y F ran k G . K liew er
Jr., p resid en t, C o r d e ll N a tion al. P resid
in g o v e r th e m e e tin g o f m em b ers o f the
A m e rica n Bankers A s socia tion w ill b e
P h ilip C . K id d Jr., p resid en t, F irst N a
tiona l, N orm a n , an d J u d g e W illia m J.
H o llo w a y w ill ad dress the co n v e n tio n .
O B A C h airm an to Retire
M orrison
G.
Tucker,
1975-76 O BA ch. and
im m ediate past pres,
of
the
association,
w ill retire from the
form er position after
this y ea r's convention
M ay 11-13 in O k la
homa City. Mr. Tucker
is
ch..
W ill
Rogers
Bank, O klahom a City,
and is asso ciated w ith
four other local banks.
He retired from Liber
ty
N at'l,
O klahom a
City, in 1969 and re
m ains an advisory dir.
■ M I C H A E L S. L E O N A R D has b e e n
p r o m o te d to assistant v ic e p re sid e n t,
F irst N a tion a l, T u lsa . E m m a L . C r o c k
ett an d Joh n R o b e rt F orrester Jr. h a v e
b e e n n a m e d b a n k in g officers. A ll th ree
jo in e d th e b a n k in 1 9 74 .
■ L I B E R T Y N A T I O N A L , O k la h o m a
C ity , has n a m e d th e fo llo w in g d ir e c
tors: Joh n R. G ra n th a m , v ic e p re sid e n tad m in istra tion , A p c o O il C o r p .; W il
liam G . P au l, p a rtner, C r o w e , D u n le v y ,
T h w e a tt, S w in fo rd , Joh n son & B u rd ick ;
an d F o r d C . P rice, p re sid e n t an d trea
surer, E c o n o m y C o .
■ W IL L IA M
O . J O H N S T O N E has
r e jo in e d F id e lity B ank, O k la h o m a C ity,
as v ic e p resid en t, c o m m e r cia l le n d in g
d ep a rtm en t. H e orig in a lly jo in e d th e
b a n k in 1 9 7 0 an d le ft a sh ort tim e a g o
to p u rsu e an u n rela ted e n d e a v o r. In
a d d ition , th e b a n k has n a m e d T o m m y
R. K e lle y assistant cash ier. H e w ill
serve as assistant m a n a g er o f th e o p e r a
tions u n it o f th e b a n k in g serv ices d e
p a rtm en t.
■ F IR S T
N A T IO N A L ,
O k la h o m a
C ity , has n a m e d T e d J. S try b o s ch as
sistant v ic e p re sid e n t an d D . P atrick
M c C o y assistant cash ier. M r. S try b o s ch
g oes to th e b a n k fr o m F irst N a tio n a l
State o f N e w Jersey, N ew a rk , w h ile
M r. M c C o y has b e e n w ith F irst N a
tion a l sin ce 1 9 7 4 .
■ W IL L IA M
M. CAM PBELL
has
b e e n p r o m o te d fro m
assistant v ic e
p re sid e n t a n d system s d e p a rtm e n t m a n
a g er t o v ic e p resid en t-op era tion s at
B ank o f O k la h om a , T u lsa . L e e D a n iel
has b e e n n a m e d a co rr e s p o n d e n t b a n k
in g officer a n d S h irley Startz an d D a v id
M . Sm ith h a v e b e e n e le v a te d to as
sistant v ic e p resid en ts. M r. D a n ie l w ill
h a n d le co rr e s p o n d e n t b a n k in g a ctiv ity
in w estern O k la h om a , sou th ern K ansas,
n orth ern T exa s a n d th e T ex a s P an
h a n d le.
■ D A V ID
J. M O N T G O M E R Y has
b e e n e le c te d v ic e p resid en t, F id e lity
B ank, O k la h o m a C ity , an d w ill h e a d
the b a n k ’ s n e w in tern a tion a l b a n k in g
d ep a rtm en t. M r. M o n tg o m e r y fo rm e rly
w a s w ith a n oth er O k la h om a C ity ba nk .
O n th e e v e n in g o f M a y 12, a 6 :3 0
r e ce p tio n is sc h e d u le d , to b e fo llo w e d
o n e h o u r later b y d in n er. P r o v id in g the
100
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Federal Reserve Bank of St. Louis
MID-CONTINENT BANKER for May 1, 1976
Fidelity’s case
for
business
Financial strength, resources
and professional people dedicated to
excellence in correspondent
banking service.
Fidelity’s com m itm ent to excellence begins with
top management. Chairman and Chief Executive
Officer Jack T. Conn believes a total bank must
offer correspondents the professional know-how
to answer the demanding needs of today’s
banking business.
He and all the professionals at Fidelity put
this belief into action with innovative services
and programs designed to increase the
profitability of your bank and enable you to
better serve your customers.
We think you’ll find it reason enough to
make a change . . . to Fidelity Bank.
® T -'
.
:
::v '
"
Let us present our case
for your bank’s business.
Fidelity
Bank
N.A.
J
R obinson at R obert S. K err
O klahom a City
MID-CONTINENT BANKER for May 1, 1976
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Member F.D.I.C
101
NEWS
From the Mid-Continent Area
Alabama
■ J O H N M A P L E S JR. has b e e n n a m e d
p re sid e n t, U n io n Bank, M o n tg o m e ry ,
s u c c e e d in g Joh n H . N e ill Jr., w h o has
b e e n e le c te d ch a irm an . M r. N eill, a
p a st A la b a m a Bankers A sso cia tio n p re s
id e n t, retains his title o f C E O an d s u c
c e e d s T h o m a s B. H ill Jr., w h o has b e e n
n a m e d ch a irm a n em eritus. H e n ry A .
L e slie , fo r m e rly sen ior v ic e p resid en t,
has b e e n a p p o in te d e x e cu tiv e v ic e pres
id e n t. T h e fo llo w in g h a v e b e e n e le v a te d
■ ROBERT
J.
BLACKW ELL
has
b e e n e le c te d e x e cu tiv e v ic e p resid en t
a n d d ir e c to r o f F irst B a n c g ro u p -A la
b a m a , In c ., M o b ile . H e w ill b e in
ch a rg e o f in vestm en ts. M r. B la ck w e ll
jo in e d
th e affiliate, F irst N a tion a l,
B irm in g h a m , in 19 6 1 an d p resen tly
serves as a ctin g p re sid e n t a n d C E O ,
H e n d e rs o n
N a tion a l, H u n tsv ille, an
affiliate ba nk.
Illinois
■ M E L V I N C . L O C K A R D , ch a irm a n ,
F irst N a tion a l, M a tto o n , M a tto o n B ank
an d F irst N a tion a l, C o b d e n , an d v ic e
p resid en t, C u m b e rla n d C o u n ty N a tio n
al, N e o g a , has b e e n in b a n k in g 5 0
years. H e jo in e d th e C o b d e n in stitu
tion in 1 9 2 6 an d w a s n a m e d C E O 10
years later. In 1 9 5 6 , M r. L o c k a r d w as
n a m e d p resid en t, F irst N a tion a l, M a t
toon . H e has serv ed tw o term s as a d i
r e cto r o f th e C h ic a g o F e d an d w as
p re sid e n t o f th e Illin ois Bankers A s s o
cia tion in 1 9 5 2 -5 3 . H e w as an o r ig i
n a tor in 1 9 5 3 o f th e Illin ois Bankers
S c h o o l at C a rb o n d a le an d has serv ed
as a d ire cto r o f A M B I. M r. L o c k a r d
w as A M B I ’s m e m b e rs h ip c o m m itte e
ch a irm a n in 1 9 7 3 .
to sen ior v ic e p resid en ts: J. V a n c e
W a lk e r, fr o m v ic e p resid en t, reta in in g
his title o f ca sh ier; R o b e r t E . K elly ,
fro m v ic e p re sid e n t, reta in in g th e title
o f sen ior trust officer; W illia m R . Joh n
son, w h o h e a d s th e in stallm en t loa n
d e p a rtm e n t; a n d G e n try A . M artin ,
m a rk etin g a n d p u b lic relations h ea d .
E d m o n d J. D o w e , v ic e p resid en t, has
b e e n p r o m o te d to v ic e p re sid e n t an d
co m p tr o lle r, w h ile Joh n W . C o x has
b e e n e le v a te d fr o m assistant v ic e p resi
d e n t to v ic e p re sid en t.
Union Nat'l Expansion O pened
■ E U G E N E L . F R I Z Z O has b e e n p r o
m o t e d to sen ior in stallm en t loa n officer
o f F irst N a tion a l, A lto n . M r. F riz z o
jo in e d th e b a n k last January a n d has
b e e n n a m e d in stallm en t loa n d e p a rt
m en t m a n a ger.
Officials of Union Nat'l, East St. Louis, and
local dig nitaries perform opening cerem onies
for new d rive-up /w alk-up expansion of the
bank (from I.): Louis Schlafiy, v.p.; John J.
K assly and H arry A. Lutz, directors; Albert J.
O 'Brien, ch.; R. W. W allace, pres.; Fred Teer,
adm in, asst, to m ayor of East St. Louis; W illie
Nelson, pres., East St. Louis C of C ; Frank
Davis of radio station W ESL; and H. F. C halfant and L. L. Schaltenbrand, directors. The
new expansion includes three drive-up and
tw o w alk-up w ind ow s.
■ T H E N E W A irp o rt N a tio n a l o p e n e d
in B eth a lto A p ril 7 w ith ca p ita l an d
surplus o f $ 4 0 0 ,0 0 0 e a ch an d u n d iv id e d
profits o f $ 2 0 0 ,0 0 0 . G e o r g e M . R y rie
is ch a irm a n ; A Jesse H op k in s, p resi
d en t; E u g e n e V . W risch n ik , e x e cu tiv e
v ic e p resid en t; an d M y rn a K. M a n d o rca , ca sh ier an d b o a r d secretary. M r.
R y rie is p resid en t, F irst N a tion a l, A lto n .
■ THE N EW H E A D Q U A R T E R S
b u ild in g o f W h e e lin g T ru st has o p e n e d .
B u ilt o f stru ctu ral steel, its ex te rio r is
o f p re ca st c o n c re te an d in su la ted glass.
T h e b u ild in g has 7 2 ,0 0 0 sq u a re fe e t
o f sp a ce an d p a rk in g fo r 3 6 4 cars.
W h e e lin g T ru st o c c u p ie s th e first tw o
floors, w h ile th e th ird is fo r ten an t use.
A fea tu re o f th e b a n k ’s in terior is th e
16 tellers stations a n d tw o w a lk -u p
tellers. B e h in d th e tellers area is a
th r e e -d im e n s io n a l w a l l - h a n g i n g o f
w o v e n r o p e b y th e C a n a d ia n artist,
Senior.
N ew Banco do Brasil Office
■ J O H N M . C A M P B E L L III has b e e n
p r o m o te d to assistant v ic e p resid en t,
sou th ea stern b a n k in g d e p a rtm en t, at
F irst N a tion a l, B irm in g h a m . M arth a
Jean O e ls ch la e g e r, m a n a ger, C en tu ry
P la za an d C e n t u r y /E a s t w o o d b ra n ch es,
has b e e n n a m e d an assistant cash ier.
M r. C a m p b e ll jo in e d th e b a n k in 1 9 7 2
a n d M iss O e lsch la e g e r, in 1 9 7 1 .
102
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
C H IC A G O — Banco do Brasil, said
to be Latin Am erica’s largest bank,
has open ed a representative office
at 33 North Dearborn.
T he event was marked b y an in
terview given b y Bank President
A ngelo Calm on de Sa, and a recep
tion at the M id-A m erica Club.
MID-CONTINENT BANKER for May 1, 1976
■ C H IC A G O
BANK OF COM
M E R C E has e le c te d H a r o ld M eitu s,
p re sid e n t a n d c h ie f o p e r a tin g officer,
S u p e rio r M a tc h C o ., an d V ic t o r H .
B r o w n , co m p tr o lle r, S ta n d a rd O il C o.
(I n d ia n a ), as d irectors.
■ V I N C E N T P. B A R R E T T has b e e n
n a m e d v ic e p resid en t, cash ier a n d a d i
r e cto r o f G la d s to n e -N o r w o o d T rust,
C h ic a g o . H is b a n k in g b a c k g r o u n d in
clu d es posts w ith a n u m b e r o f C h ic a g o area ba nks.
■ J O S E P H R . F R E Y has a n n o u n c e d
his retire m e n t as ch a irm a n , L a k e S h ore
N a tion a l, C h ic a g o . H e w ill c o n tin u e as
ch a irm a n em eritu s an d w ill b e s u c c e e d
e d b y A . T h o m a s E tch e s o n , fo r m e r v ic e
ch a irm an . M r. F re y , a p a st p re sid e n t
o f th e Illin ois B ankers A sso cia tio n ,
jo in e d L a k e S h ore N a tio n a l in 1 9 29 ,
w as e le c te d b a n k p re sid e n t in 1 9 33 ,
p re sid e n t an d ch a irm a n in 1 9 5 2 an d
ch a irm a n a n d C E O in 1 9 61 .
■ R I C H A R D A . C O N R A D has b e e n
n a m e d assistant v ic e p re sid e n t at Bank
o f E lm h u rst, w h ile L ily H arkin s an d
Z. Joh n K o p e r h a v e b e e n a d v a n c e d to
assistant cashiers.
D K A I J O H N S O N has b e e n p r o m o te d
to ca sh ie r at D a rie n B ank, w h ile B ar
b a ra O w e n has b e e n e le c te d assistant
cash ier. M rs. J oh n son has b e e n w ith the
b a n k sin ce its o p e n in g 2/2 years a g o,
w h ile M rs. O w e n has b e e n th ere tw o
years.
■ J A M E S E . G A T T O N , sen ior v ic e
p re sid e n t, U n ite d B a n k o f Illin ois,
R o c k fo r d , has b e e n e le c te d a d ir e c to r
o f th e affiliate, U n ite d B ank o f R o c k
fo r d .
■ L A W R E N C E P. M c D O N N E L L has
jo in e d H e r it a g e /C o u n t y B ank, B lu e
Isla n d , as trust officer. H e h as 2 4 yea rs’
trust e x p e r ie n c e a n d w ill d e v e lo p a
fu ll-s ca le trust d e p a rtm e n t at th e ba nk.
■ M I L L I K I N N A T I O N A L , D e ca tu r,
is k n o w n as “ O ’ M illik in N a tio n a l” each
M a r c h 17 (S t. P a trick ’s D a y ) . T h is
year, th e e v e n t w a s c e le b r a te d at the
b a n k w ith in vitation s— v ia n e w s p a p e r
ads— fo r o n e an d all to c o m e in an d
r e c e iv e fo u r -le a f clo v e rs a n d “ sh am
r o c k ” d o u g h n u ts an d c o ffe e . D u r in g the
n o o n h ou r, th e “ ta le n te d lads a n d fair
colle e n s o f O ’ M illik in U n iv ers ity C h a m
b e r S in g ers” g a v e a re cita l o f Irish
son gs in th e b a n k ’s lo b b y . T h e m u sica le
w a s ca rrie d liv e on the lo c a l ra d io sta
tion.
"Talented la d s and fa ir colleens of O'M illikin
University C ham ber Singers" entertain noonhour audience on St. Patrick's d a y in lobby of
M illikin Nat'l, Decatur. Visitors to bank that
d a y also received fou r-leaf clovers and "sh a m
rock" doughnuts and coffee.
■ W I L L I A M E . H O R N , assistant v ic e
p resid en t, B ank o f N a p e rv ille , has b e e n
nam ed
in sta llm en t loa n d ep a rtm en t
h e a d , s u c c e e d in g W a lla c e E . Z o o k , w h o
has b e e n e le c te d C E O o f th e n e w F irst
S ecu rity B ank, F o x V a lle y C en ter. M r.
H o rn jo in e d B ank o f N a p e rv ille in 1 9 70 .
■ C O N T IN E N T A L IL L IN O IS N A
T I O N A L , C h ic a g o , has a n n o u n c e d that
th e fo llo w in g h a v e b e e n p r o m o te d to
s e c o n d v ic e p resid en ts: D a v id L . A t
kins, Jam es R . Ick la n , Jam es P. L o n g ,
D e n n is J. A m a to , G a ry A . B re id e n b a ch ,
R ich a rd L . C o e n , Jam es W . D u tto n ,
P a trick M . G o y , W illia m D . M ich a e l,
E v a n R . P atterson , W illia m R . Sm ith,
Jon E . V a n c e , G e ra ld E . B u lda k , H e le n
L . C h a se, K en n eth W . Joh n son , M i
ch a e l J. A d le r, Joh n M . B u ssch er, P a u l
D . M o o re , Jam es R. O ’ B rien , P h illip
H . W ilh e lm , W illia m R . C h u rch , Jean
ette S. F la n in g a m a n d D . N ich o la s
M a n o ch e o . T h re e o f th e b a n k ’ s d i
rectors h a v e a n n o u n c e d th eir d ecision s
to retire: D o n a ld M . G ra h a m , fo r m e r
ch a irm a n ; T ild e n C u m m in g s , fo rm e r
p resid en t; a n d S tew art S. C ort, fo rm e r
ch a irm a n an d C E O , B e th leh em Steel
C orp .
■ T H A D D E U S E . W I T W I C K I has
b e e n p r o m o te d to assistant v ic e p re si
d e n t at N a tion a l B o u le v a rd B ank, C h i
c a g o , w h ile Jack L . R ile y has b e e n
n a m e d assistant system s officer and
G re g o ry F . U d e ll has b e e n a p p o in te d
an assistant cash ier.
■ H A R R IS B A N K , C h ic a g o , has e le c t
e d F ra n cis O . M ig n a n o a n d W illia m M .
M c K in le y v ic e p resid en ts. M r. M ig
n a n o is in th e b a n k in g d ep a rtm en t,
w h ile M r. M c K in le y is in tern a tion a l
op era tion s
d iv ision
a d m in is tr a to r .
T h o m a s S. H a rd in has b e e n n a m e d as
sistant v ic e p resid en t, in v es tm en t d e
p a rtm en t, a n d in th e trust d ep a rtm en t,
Jam es W . Isa a cson has b e e n e le v a te d
to trust officer a n d S tep h en C . S ielin g,
to o p era tion s officer.
■ P A T R I C K C . O ’ M A L L E Y has b e e n
e le c te d e x e cu tiv e v ic e p resid en t, F irst
B ank, O a k Park. H e g o e s th ere fro m
D ro v e rs N a tion a l, C h ic a g o , w h e r e he
w as sen ior v ic e p resid en t, co m m e r cia l
loa n d iv ision .
MID-CONTINENT BANKER for May 1, 1976
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Indiana
■ O L D N A T I O N A L , E v a n sv ille, has
p r o m o te d C a rl R o o t to op era tion s o f
ficer a n d G a ry C h a ttin to op era tion s
analysis a d m in istra tor. M r. R o o t jo in e d
th e b a n k in 1 9 7 3 a n d assum es ov e ra ll
resp on sib ility fo r d e p o s it b o o k k e e p in g
an d transit, w h ile M r. C h attin , w h o
jo in e d th e b a n k in 1 9 7 4 , has b e e n serv
in g as assistant m a n a ger, 4 1 N orth O f
fice.
■ J A M E S A . T H R E A T T has b e e n
n a m e d assistant con tro lle r at St. J osep h
B ank, S ou th B e n d , w h ile S tep h an ie
M a h er has b e e n e le c te d an assistant
cash ier. P rior to jo in in g th e b a n k , M r.
T h re a tt w as w ith B ank o f In d ia n a ,
G a ry. M iss M a h e r m a n a ges St. Joseph
B ank’s C le v e la n d R o a d O ffice. T h e
b a n k also has a n n o u n c e d th e o p e n in g
o f its n e w 4 8 5 4 W e s te rn A v e n u e O ffice.
Its m a n a g e r is T im W r o b le w s k i.
■ P U R D U E N A T I O N A L , L a fa y e tte ,
has n a m e d th e fo llo w in g assistant v ice
p resid en ts: R oss W . B id d in g e r, b ra n ch
ad m in istra tion , an d W a rre n B u rg et an d
D a v id T . Strother, d a ta p roces sin g .
D e a n e A . N els on has b e e n e le c te d as
sistant v ic e p re sid e n t a n d trust a d m in
istration officer, w h ile M ich a e l A . Presti
has b e e n e le v a te d to trust ad m in istra
tion officer.
■ E D W A R D M . M E Y E R h as b e e n
p r o m o te d to assistant v ic e p re sid e n t at
M erch a n ts N a tion a l, In d ia n a p olis. L u c y
A . E m ison has b e e n n a m e d in vestm en t
officer; D a v id L . S cott, m a n a ger. H an n a
& S h e lb y O ffice ; a n d R o n a ld C . T ie r
n e y assistant cash ier.
■ A M E R IC A N
FLETCH ER
NA
T I O N A L , In d ia n a p olis , h as p r o m o te d
th e fo llo w in g to assistant v ic e presid en ts
an d in v es tm en t officers, trust an d asset
m a n a g e m e n t: Jam es L . K e n n e d y Jr.,
F . D a n ie l K ritsch an d T h o m a s L .
Sh arpe. N a m e d assistant v ic e presi
d en ts, p erson a l b a n k in g , w e re James
C . H a n n a h , S o u th p ort B a n k in g C en ter,
an d S tep h en R. Sm ith, G le n d a le B a n k
in g C en ter. John S. B en n ett has b e e n
n a m e d T a c o m a B a n k in g C e n te r m a n
ager, an d P atrick E . C h e s e b ro u g h has
b e e n e le c t e d b a n k in g center officer,
S p e e d w a y O ffice. S tep h en P. F a h y has
b e e n a d v a n c e d to in v es tm en t op era tio n s
officer, p o r tfo lio an d m o n e y m a rk et
g ro u p , an d Jam es R. G a m b a in i has
b e e n n a m e d trust officer. R o b e rt M .
K iesle has b e e n e le c te d m a n a ger, 3 8 th
& M ith o e fe r B a n k in g C en ter, w h ile th e
fo llo w in g h a v e b e e n n a m e d d a ta p r o
ce ssin g officers: F ra n cis D . San ders,
F r e d e rick N . S cott, S tep h en J. S ch u ff
an d R o n a ld J. T a rp le e .
103
B COM PTROLLER OF THE CUR
R E N C Y Jam es E . Sm ith has a p p r o v e d
th e m e r g e r o f N e w F a n n e rs N a tion al,
G la s g o w , a n d H is ev ille D e p o s it Bank.
T h e m e r g e r w e n t in to e ffe c t A p r il 1,
an d th e a d d itio n a l b a n k in g o ffice n o w
is k n o w n as H iseville B a n k in g C en ter.
Jack L o n d o n , v ic e p resid e n t, is the
n e w o ffice ’s m a n a ger.
Small Business Advocate
Of Year/ SBA Award,
Goes to KDCC, Wichita
W I C H I T A — T h e K ansas D e v e lo p
m e n t C re d it C o rp . ( K D C C ) , has b e e n
n a m e d th e “ 1 9 7 6 K ansas Sm all B u si
ness A d v o c a te o f th e Y ea r” b y th e U . S.
Sm all Business A d m in istra tion ’ s (S B A )
d istrict o ffice h ere.
T h e a w a rd en titles th e K D C C to
c o m p e te fo r th e title o f “ N a tion a l Sm all
B usiness A d v o c a te o f th e Y ea r.”
S in ce its 1 9 65 o rg a n iz a tion , th e
K D C C has cre a te d an estim a ted 1 4 ,1 0 0 jo b s in K ansas b y m a k in g loa ns or
co m m itm e n ts in excess o f $ 6 2 m illion
to 4 6 0 in du stria l a n d co m m e r cia l firms.
T h is a ctio n has resu lted in as m u ch as
$ 5 0 m illio n in p a yrolls to b e g e n era ted
or su stain ed in th e state.
T h e K D C C has 4 2 6 m em b ers fro m
the state’s 6 0 0 ba n k s a n d m akes loans
to sm all in du stries th at d em on stra te
c o m m u n ity v a lu e b u t h a v e fin an cial
n e e d s b e y o n d w h a t ca n b e c o v e r e d b y
a n orm a l b a n k loan.
In 1 9 7 1 , th e c o rp o ra tio n b e g a n its
se co n d a ry -m o n e y -m a rk e t p r o je c t, “ K a n
sas F u n d s P ro m o te K ansas Job s,” to
p u rch a se from ba nks in the state th e
p o rtio n g u a ra n te e d b y th e SB A . S u ch
loans th e n are re sold to a n u m b e r o f
institu tions in K ansas, g e n era tin g e m
p lo y m e n t o p p o rtu n itie s a n d e x p a n d in g
th e le n d in g ca p a b ilities o f ba n k s in
K ansas. T h is year, a total o f $ 3 .9 m il
lion in loans w as p u rch a sed .
K D C C officials in clu d e : S. H . “ P e te ”
C lo w , ch a irm a n ; M a u rice E . F a g er,
v ic e ch a irm a n a n d treasurer; G e o r g e
L . D o a k , p re sid e n t; G . R. K a tz e n b a ch
a n d L a rry J. H ig h , v ic e p resid en ts; a n d
E lly n M . T y re ll, secretary.
T h e “ Sm all Business A d v o c a te o f
the Y e a r” c o m p e titio n is s p o n s o re d an
n u a lly b y th e S B A to r e co g n iz e o u t
sta n d in g a c h ie v e m e n t b y a p erson , o r
ga n iza tion , e d u ca tio n a l in stitu tion or
an y su ch e n tity th at g oes a b o v e an d
b e y o n d th e e x p e c t e d fo r b e tte rm e n t o f
sm all bu sin ess, that a d v o ca te s
the
sm all-bu sin ess ca u se an d th at p ro m o te s
the fre e -e n te rp rise system .
STANLEY
RIESEN
Louisiana
■ J IM S T A N L E Y has b e e n n a m e d
c o rr e s p o n d e n t d iv is ion h e a d at First
N a tion a l, W ic h ita , s u c c e e d in g John H .
R iesen , sen ior v ic e p resid en t, w h o has
b e e n a ssign ed resp on sib ility fo r all n a
tion a l a c c o u n t relationsh ips. M r. Stan
le y jo in e d the b a n k as assistant v ice
p re sid e n t in 1 9 6 8 an d a d v a n c e d to v ic e
p re sid e n t tw o years later. M r. R iesen
has b e e n w ith th e b a n k sin ce 1 9 3 7 and
h a d b e e n in the c o rr e s p o n d e n t d iv ision
sin ce 1 9 5 5 . H e w as n a m e d c o rr e s p o n
d e n t h e a d in 1966 .
■ K A N S A S S T A T E o f W ic h ita ’s c a p i
tal has b e e n in cre a s e d fro m $ 1 ,7 8 0 ,8 0 0
to $ 1 ,9 0 5 ,8 0 0 b y sale o f n e w stock.
■ A U G U S T A S T A T E has c h a n g e d its
n a m e to A u g u sta B ank & T rust.
■ F I R S T S T A T E , L a rn ed , has u n d e r
g o n e a n a m e ch a n g e to F irst State
B ank & T rust C o . o f L a rn ed .
Kentucky
B P H I L I P R. H A Y E S , fo rm e rly sen ior
v ic e p re sid e n t an d c o rr e s p o n d e n t h e a d
o f L ib e rty N a tion a l. L o u isv ille , has
jo in e d C itizen s Bank, E liz a b e th to w n , as
p re sid e n t an d C E O . M r. H a y es h a d
b e e n w ith his fo rm e r b a n k 11 years.
Ju n io r-B an ker Officers N am ed
The new officers of the Junior Bankers Section
of the Louisiana BA got together for a photo
after their election at the 1976 Study Conference
and Convention of the Junior Bankers (from
I.): Jerry A. Fielder, v.p. & t.o., Louisiana Bank,
Shreveport—pres.; Donald L. Bordelon, v.p.,
G u ara n ty Bank, A le x a n d ria —v.p.; Harold E.
E d w ard s, a .c., N ational Bank, Bossier C i t y sec.; and Rayford J. Simon, a .v .p ., G u ara n ty
Bank, La fayette—treas.
B GUARANTY
BANK,
A lexa n d ria ,
has e le c te d th e fo llo w in g d ire cto rs :
Jerom e A . D e K e y z e r , a lo ca l fa rm e r;
W . R a y F rye, p resid en t a n d ch a irm an ,
A F C O In du stries, In c .; D r. E d w a r d C .
U h rich , a c tin g d ir e c to r o f la boratories,
V . A . H o sp ita l; an d M y r o n D . W e lla n ,
p resid en t, W ella n s, In c.
M ississippi
■ D E P O S IT G U A R A N T Y N A T IO N A L , Jackson, has a p p o in te d W ilfr e d E .
Irish Jr. d ire cto r o f e m p lo y e e relations
a n d H . A . W h ittin g to n Jr. d ir e c to r o f
in du stria l d e v e lo p m e n t. M r. Irish, a re
tired
A rm y
c o lo n e l,
fo r m e rly
w as
ch a irm an , D e p a rtm e n t o f M ilita ry S ci-
COMMERCIAL
NATIONAL
B A N K
6 t h & M in n e s o t a A v e . 9 1 3 3 7 1 - 0 0 3 5
K a n s a s C it y , K a n s a s 6 6 1 0 1
j
P R O FESS IO N A L C O R R ESP O N D EN T BANKING S E R V IC E
104
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
MID-CONTINENT BANKER for May 1, 1976
C. H. OrndorfF Jr, Dies
The Brum low s Die in Crash
IRISH
W HITTINGTON
en ee, U n iv e rs ity o f S o u th ern M ississip
p i, w h ile M r. W h ittin g to n fo r m e rly w as
m a rk etin g sp ecia list, M ississippi M a r
k etin g C o u n cil.
Grant O. Brumlow, former New
Mexico commissioner of banking,
and his wife died recently when
their twin-engine airplane crashed
near Ruidoso.
Mr. Brumlow, at the time of his
death, was president, Cibola Life In
surance, and was the principal
shareholder of First National, Clo
vis, American National, Silver City,
and Bank of Santa Fe. He also was
president of Viva Oil Co., which
has holdings in Oklahoma and west
Texas. Mr. Brumlow had served as
campaign manager for Joe Skeen
during his unsuccessful 1974 gu
bernatorial bid.
N ew Young-Bankers' Officers
■ T H E M A L O O F F A M I L Y o f A lb u
q u e r q u e has p u rch a s e d m a jority o w n e r
ship o f F irst N a tion a l, A lb u q u e r q u e .
P rin cip a l m e m b e rs o f th e fa m ily w h o
w ill o w n th e shares are G e o r g e J., P h il
lip F ., M ik e J., H e le n (S e i) an d M a ry
Jean ( K o u r y ) . T h e b a n k fo rm e rly w as
o w n e d b y P o p u la r S erv ices, In c., Pas
saic, N . J. A M a lo o f fa m ily sp okesm a n
has in d ic a te d that th ere w ill b e n o
staff ch a n g es at F irst N a tion al.
A fter their election during the 26th annual
Study Conference in Hattiesburg and C onven
tion in Biloxi, the new officers of the Young
Bankers Section of the M ississippi Bankers
A ssociation gathered for this photo (from I.):
Cecil R. Burnham , e.v.p., Truckers Exchange
Bank, C rystal Sp rings—pres.; Glynn Hughes,
pres.. South Centra! Bank, M onticello—v.p .;
C harles A. Jo rdan Jr., v.p., Delta N at'l, Y azo o
C ity—tre a s.; and R. David Cullum , a .v .p .. De
posit G u ara n ty N at'l, Ja ckso n —sec.
■ T H E O D O R E L . L A M B has b e e n
p r o m o te d to assistant v ic e p re sid e n t at
A m e rica n N a tion a l, C h a tta n oog a . H e
jo in e d th e b a n k in 1 9 7 0 an d m os t re
ce n tly w as a m a rk etin g officer. M r.
L a m b w ill co n tin u e w ith his resp on si
b ilities in th e m a rk etin g an d p u b lic
affairs d ep a rtm en t.
New Mexico
Bank W eek Recognized
SEXTON
Gov. Jerry A p o d aca (c.) meets w ith Reba
Thom as, ch., NMBA Bank W eek Com m ., and
v.p., Am erican Bank of Commerce, A lb uq uer
que, and W ayne Stew art, NMBA pres., and
pres, and t.o., First N at'l, A lam og ordo, in
recognition of Bank W eek in N ew M exico. The
event w a s set for A p ril 12-18.
MID-CONTINENT BANKER for May 1, 1976
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
LAMB
B M E R R I L L S E X T O N has b e e n a p
p o in te d e x e cu tiv e v ic e p re sid e n t in
ch a rg e o f ad m in istra tion o f F irst T e n
n essee N a tion a l, C h a tta n o o g a . H e goes
th ere fr o m th e affiliate, F irst T en n es see
N a tion a l C o rp ., M e m p h is, w h e r e h e w as
v ic e p re sid e n t in ch a rg e o f strategy
d e v e lo p m e n t an d co n trol. M r. Sexton
also su p erv ised in vestor relations at the
H C an d is s u c c e e d e d b y Ia n A r n o f, v ic e
p resid en t. As th e C h a tta n o o g a b a n k ’ s
h e a d o f ad m in istra tion , M r. S exton w ill
o v e rs e e op era tion s, in fo rm a tio n system s,
p rop erties
m a n a g em en t,
a cco u n tin g ,
a u d it an d p erson n el.
Charles
H.
OrndorfF
Jr., v.p., nat'l accounts
division, Nat'l Bank of
Commerce,
Memphis,
died March 9 of an
ap p arent heart attack.
He joined the bank in
1937 and had served
in the correspondent
dept.
B J A M E S C . A L L E N has b e e n a d
v a n c e d to assistant v ic e p resid en t, c o m
m ercia l b a n k in g d ep a rtm en t, A m e rica n
N a tion a l, B ea u m on t. In th e c h e c k p r o
cessin g d ep a rtm en t, D a lto n A n d r e w
B ea d le Jr. an d S h irley Iren e Sm ith
have
been
p r o m o te d
to
assistant
cashiers.
B H . M . D A U G H E R T Y JR. has b e e n
e le c te d p re sid e n t an d C E O o f PanN a tion a l G ro u p , In c., E l P aso, s u c c e e d
in g B. G le n J orda n , w h o re s ig n e d to
p u rsu e
b u siness
o p p ortu n ities .
M r.
D a u g h e rty w ill retain his p o s itio n o f
p re sid e n t an d C E O o f th e H C ’ s fla gsh ip
b a n k , State N a tion a l, E l P aso, w h ich
h e jo in e d in 1 9 7 0 , w h ile G o r d o n L .
“ D o n ” H o llo n has jo in e d that ba n k
as trust officer an d trust m a rk etin g
d e p a rtm e n t m a n a ger. H e fo r m e rly w as
trust bu sin ess officer, N a tion a l B ank o f
C o m m e r ce , San A n to n io . A t a n oth er a f
filiate, M e tr o B ank, D allas, B o b A .
L ittle jo h n , fo rm e r treasurer o f C e n te x
C o r p ., has b e e n n a m e d ch a irm a n an d
C E O . P rior to his serv ice at C en tex ,
M r. L ittle jo h n h a d b e e n a ssocia ted w ith
F irst N a tion a l, D allas, as a c o rr e s p o n d
en t ba nker.
B F R O S T N A T I O N A L , San A n to n io ,
has a n n o u n c e d several p ro m o tio n s : to
v ic e p resid en ts, R ich a rd K le b e r g III,
c o m m e r cia l le n d in g , an d Jerry A llen ,
trust fa rm an d ra n ch ; to assistant v ic e
p resid en ts, C a role A rn o ld and Shirley
F lo y d , p erson n el, an d John S tover,
m e th o d s a n d p la n n in g ; and to person a l
b a n k in g officer, G loria A . M u n o z .
KLEBERG
DAUGHERTY
105
Profit or Perish
Index to Advertisers
N O W Onslaught
American
Am erican
Am erican
American
(C on tinu ed from page 24)
(C on tin u ed from page 14)
an d a d d in all o f th e frin g e b en efits an d
e v e ry th in g else h e costs y o u . M u ltip ly
that ou t. N o w y o u ’v e g o t y o u r a d m in is
trative exp en ses b y a cco u n t. Y ou al
re a d y h a v e all o f y o u r o p e r a tin g ex
p en ses b y a c c o u n t, a n d y o u ca n n o w
lo o k at B essie’s a c c o u n t a n d sa y to y o u r
self, “ W e are g e ttin g a fe e o f $ 5 0 0 a
y e a r fo r this a cco u n t, b u t it’ s co s tin g
us $ 1 ,0 0 0 th e w a y w e ’re h a n d lin g it.”
terns, is in a q u a n d a ry . H e cle a rly r e c
o g n iz e s that su ch a rela tion sh ip , at least
in itially, is g o in g t o b e a substantial
drain o n earn ings. Y e t if h e w aits in the
b a ck g ro u n d to o lo n g , th e m a rk et m a y
b e c o m e satu rated b e fo r e h e gets in.
T h e ty p ic a l in d e p e n d e n t b a n k er at
th e
H a w a ii
c o n v e n tio n
fo u n d
the
w e a th e r d e lig h tfu l an d th e to p ics d is
cu s sed d u rin g th e e v e n t to b e th o u g h tp r o v o k in g a n d q u ite seriou s. O u tsid e
o f th e c o n v e n tio n , th e o b s e rv a b le d e
v e lo p m e n ts w e re p e rh a p s o f m o re c o n
cern . T h e re is n o sim p le solu tion to th e
p r o b le m s fa c in g in d e p e n d e n t bankers.
T h e y r e c o g n iz e that oth e r fin an cial in
term ed ia ries— S&Ls, m u tu als an d cred it
u n ion s— are m o v in g a g g res siv ely in to
th e area o f fu n d rem ission an d p a y
m e n t system s, an d th e y are p a y in g in
terest on th eir cu s tom ers’ o r m e m b e rs’
fu n d s. T h e ba nkers also r e c o g n iz e that
m a n y o f th e IB A A m e m b e r an d n o n
m e m b e r ba n k s are o ffe rin g in terest-p a y
in g N O W a cco u n ts , w h ic h are th e
eq u iv a le n t o f d e m a n d a cco u n ts , th o u g h
th e y aren ’t c a lle d that.
W h a t ca n th e in d e p e n d e n t b a n k er d o
u n d e r th ese circu m sta n ce s ? It’ s lik ely
that th e su cce s sfu l co m m u n ity b a n k e r
w ill b e th e o n e w h o has taken tim e an d
th o u g h tfu lly p e ru s e d th e situ ation c o n
fr o n tin g his o w n b a n k . I r e c o m m e n d
that in d e p e n d e n t ba nkers s p e n d a d d i
tiona l tim e to stu d y w h a t costs are in
v o lv e d in th eir c o m p e tito r s ’ op era tion s
an d in th eir o w n . In e v ita b ly , if th e cost
o f a b a n k ’s fu n d s g oes u p , it m u st pass
on at lea st part o f th ose costs in th e
fo rm o f h ig h e r in terest rates to its b o r
row ers an d it m u st h ike ch a rg es fo r
serv ices th at it p r e v io u s ly g a v e aw a y.
N o w w h a t d o y o u d o ? W e ll, first y o u
g o to th e cu s to m e r an d say, “ L o o k ,
Bessie, y o u k n o w h o w m u c h w e ’v e b e e n
w o rk in g w ith y o u o n that son o f you rs
w h o ’s in c o lle g e h a v in g all th ese p r o b
lem s. T h a t takes tim e, takes m o n e y , an d
th e fa c t is, w e are n o t b e in g c o m p e n
sa ted fo r th e jo b w e ’re d o in g .” I f y o u ’re
n o t d o in g it w e ll, sh e’s g o in g to fire
y o u , b u t th a t’s a n oth er story. S u p p os e
she d o e s n ’ t a g re e to p a y y o u . N o w y o u
h a v e tw o o th e r c h o ic e s . Y ou eith er g et
rid o f th e a c c o u n t (a n d th ere is n o t
m u ch p o in t in ca rry in g it if y o u ’re n o t
m a k in g a n y m o n e y on it) or y o u b e g in
to b r in g th e a c c o u n t in to lin e so th at
y o u ca n m a k e m o n e y on it. Y ou b e g in
to c u t o u t so m e o f th ose extra services.
Y ou b e g in to cu t d o w n on th ose c o n v e r
sations y o u h a v e w ith her. T i y to b rin g
her in to lin e so that this b e c o m e s a
p ro fita b le a cco u n t.
T h e o th e r d a y , I sa w som e graffiti
o n a w a ll th at I e n jo y e d . It said, “ I f
e v e ry th in g seem s to b e c o m in g y o u r
w a y , y o u ’re p r o b a b ly in th e w r o n g
la n e .” D e s p ite m y s e e m in g pessim ism
w h e n I started this article, I think
things are c o m in g o u r w a y — I ’v e n e v e r
b e e n m o re o p tim is tic a b o u t th e fu tu re
o f th e trust bu siness. W e d o h a v e a lot
o n the plu s side. M a n y o f u s— m a n y o f
y o u — h a v e m a g n ifice n tly trained staffs
w h o n u t a lo t o f e n e rg y a n d d e d ica tio n
in to th eir w o rk .
A s I m o v e a ro u n d , I ’m alw a ys im
p ressed w ith th e ca lib e r o f trust p e o p le
that I fin d across th e c o u n tr y an d th eir
en th usiasm fo r th eir jo b s — th at’ s a real
plu s in a n y bu sin ess. Y o u h a v e a lot o f
cu stom ers w h o m y o u ’re serv in g w ith
c o n s id e r a b le skill. B ut th e fa c t is that
th ere are m a n y p e o p le o u t th ere y o u ’ re
n o t re a ch in g . I ’ d b e w illin g to b e t th at
in y o u r co u n ty , y o u as trust co m p a n ie s
p r o b a b ly h a n d le 20-30 % o f estates o v e r
a certain size. T h e rest o f th e p o p u
la tion n am es a sp ou se, or so m e oth er
in d iv id u a l w h o is fa r less q u a lified than
y o u . O u r m arkets are fa r fro m satu
ra ted — in d e e d th e trust bu sin ess ca n r e
tain all th e e lem en ts o f a g ro w th b u s i
ness if w e ’ll b u t m a n a g e o u r c o m p a n ie s
w e ll so as to retu rn th em to p rofita b ility.
106
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
TRY US
FOR YOUR NEXT
ENVELOPE
REQUIREMENT*
MISSOURI ENVELOPE CO.
10655 GATEWAY BLVD.
Bank D ir e c to r y ............................... 54
National Bank, St.Joseph, Mo.
91
National Bank, St. Louis ..............
86
Prem ium & Specialty Corp............ 72
Bank o f America ..............................................
Bank o f Oklahoma ..........................................
Bank o f St. Ann, Mo..........................................
Boatm en’s National Bank .............................
Brandt, Inc...........................................................
Brentwood (Mo.) Bank ...................................
65
98
94
67
55
86
Central T rust Bank, Jefferson City, Mo. .. 82
Citizens Bank, Grant City, Mo....................... 94
City Bank, St. L o u is ........................................
86
Commerce Bank, Kansas C ity ..................... 87
Comm ercial N at’l Bank, Kansas City, Kan. 104
Com m ercial N at’l Bank, L ittle Rock .......... 74
De Luxe Check Printers, In c ..........................
Depositors P ortrait Service ...........................
Downey Co., C. L................................................
57
28
14
Farmers Grain & Livestock H edging Corp. . 66
F ide lity Bank, Oklahoma C ity ..................... 101
Financial Placements ....................................... 69
First City National Bank, Houston .............
71
First Missouri Development Finance Corp. 92
First National Bank, D a lla s .........................
3
First National Bank, Kansas C ity ............... 59
4
First National Bank, M in n e a p o lis ...............
First National Bank, St. Charles, Mo........... 97
First National Bank, St. Joseph, Mo............. 88
First N ational Bank, St. L o u i s ............. 33, 108
First N at’l Bank & Trust Co., Joplin ............ 92
37
First National C ity Bank, New Y o r k ...........
First State Bank & T rust Co., Conway, Ark. 80
Flo-Go Signal System ..................................... 54
Florissant (Mo.) B a n k ......................................
90
Foundation of the Southwestern Graduate
School o f Banking ................................... 34, 49
Fourth National Bank, T u ls a ......................... 47
Fourth N at’l Bank & T rust Co., W ichita . . . 53
Globe Life & A ccident Insurance Co...........
Guild Associates ..............................................
15
90
H B E Bank F a cilitie s Corp............................
Harland Co., John H........................................
Harrow S m ith Co................................................
H ill, Crawford & Lanford, In c .......................
5
21
79
79
Industrial Life Insurance Co. .......................
Insured C redit Services, In c ...........................
International S ilver C o . ...................................
Investm ent S ecurities Association ..............
92
23
17
63
Kansas Bank Note ..........................................
29
Liberty N at’l Bank & T rust Co.,
Oklahoma City ..............................................
2
MGIC-Indem nity Corp.................................... 30-31
Manchester Bank, St. L o u is ........................... 85
Mem phis Bank & Trust Co..............................
73
M ercantile Bank, St. L o u is .............................
6
Missouri Envelope Co....................................... 106
McCourtney-Breckenridge & Co.....................
McPheeters Group, The ...................................
94
86
National Stock Yards National Bank .........
107
Perry, Adams & Lewis S ecurities, In c .........
Pioneer Bank & Trust Co................................
Prescott, W right, S nider Co.............................
Prestige Buyers ................................................
93
97
25
11
Rand M cN ally & Co..........................................
Ridgeway & Associates, John W...................
Risk Insurance Management Guide ............
24
92
51
SLT Warehouse Co............................................
St. Johns Bank & Trust Co............................
St. Louis County National Bank .................
Salem China Co.................................................
Scarborough & Co..............................................
South Side National Bank, St. Louis ..........
Southern Comm ercial Bank, St. Louis . . . .
Standard Life Insurance Co.,
Jackson, M iss..................................................
Stern Brothers ..................................................
27
89
95
9
35
84
94
Tension Envelope Corp.....................................
50
US Life Credit Life Insurance Co...................
Union National Bank, L ittle Rock .............
U nited Missouri Bank, Kansas C i t y ............
20
81
13
W hitney National Bank .................................
Worthen Bank & Trust Co..............................
19
78
Zahner & Co........................................................
96
77
20
ST. LOUIS, MO. 63132
Phone 314/994-1300
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M ID-CONTINENT BANKER for May 1, 197 6
N ow ! all together
welcome-toyoiu'
”
eonven(ioiif
••
While you enjoy work sessions, fun and fellowship, rest assured that
the Stock Yards Bankers who work in harmony with you will be there to
greet you and share in the arrangements.
In the meantime, other authoritative officers who know the score will
be back at the bank, available as your always-ready second staff at
618-271-6633.
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Federal Reserve Bank of St. Louis
YOUR B A N K E R S B A N K "
V
J u s t a c r o s s the r iv e r fro m S t L o u is
THE NATIONAL STOCK YARDS NATIONAL BANK
OF NATIONAL CITY
NATIONAL STOCK YARDS. ILLINOIS 62071
u t trauonce Corp.
W o r k w it h a b a n k e r
w h o k n o w s w h a t h is b a n k
c a n d o fo r y o u .
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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
Member FDIC
I IH
@FedFRASER