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The Financial Magazine o f the Mississippi Valley & Southwest M AY 15, 1977 CofC Counsel Says Credit Life Income Should Go to Banks, Not to Individuals Page 29 Regulatory Changes Facing Banking in N ext 10 Years Page 2 3 Benefits Versus Costs of Regulatory Changes Page 2 7 Equitable Solutions to Pricing Questions Called For Page 6 0 C O N V E N T IO N P R E V I E W S I Mississippim §|§¿*|rennessee mÊÊSÊÎMnois! https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Arkansa$M k * New Mexico • Indiana Is your bank interested in more Demand Deposits? Recently, Macklanburg-Duncan Company’s salaried employees became the first corporate employees in Oklahoma to have their paychecks electronically processed and deposited directly to individual bank checking accounts... with the help of Liberty. This service means increased Demand Deposits for us. And we can help you offer the same service for employees of your commercial customers. Direct payroll deposit utilizes Liberty’s Electronic Funds Transfer SERVICES, and the facilities of the MidAmerica Automated Clearing House Association... tnrough Liberty’s Correspondent Department. For example, with Direct Deposit Payroll service, employees can be guaranteed their pay will be available in checking or savings accounts on time ...a ll the time, even when they are out-of-town or on vacation. There is no chance for lost or stolen paychecks... time cpnsuming grocery store visits ...and no need for the employee to carry large amounts of cash. To learn more about this exciting new opportunity contact the Correspondent Department... m tp j LIBERTY THE BANK OF MID-AMERICA Liberty National Bank and Trust Company/P. O. Box 25848/O klahom aC ity 73125/Phone: 405/231 -6386/M em berF.D .I.C . https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis “When you come up with a better credit life policy, it’s hard to keep it to yourself.” Durham Life’s new Low 100. Designed especially for mobile home loans and second mortgages, the fastest growing part of the mortgage loan business. We call it the Low 100 because premiums are lower for the borrower, but you get 100% protection. You’re paid back the entire unpaid balance net of unearned interest and finance charges, yet you can offer your custom ers lower monthly payments. We keep the premiums low by fully covering your exposure and no more. One premium is charged regardless of age. The entire premium is paid at one time, eliminating paper work, collec tions and policy lapses. And no medical exam is required. With all this you still get the same attractive com mission plan. The Low 100. One more policy in Durham Life’s complete line of credit life. Everything you’ll ever need. Call Dan Boney. Durham Life Durham Life Insurance Company Home Office: Raleigh, N.C. 27611 P.O. Box 27807, Tel. 919/782-6110 MID-CONTINENT BA N K ER fo r May 1 5 , 1 9 7 7 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Convention Calendar The Financial M agazine o f the M ississippi V alley & Southw est May 15, 1977 Volume 73, No. 6 FEATURES 23 BANK REGULATORY TRENDS James E. Smith What changes are coming in five-10 years? 25 GOVERNMENT CREDIT ALLOCATIO N W. Liddon McPeters How can banks head it off? 27 REGULATORY/COMPETITIVE PRESSURES Philip E. Coldwell Their benefits versus their costs 29 CREDIT LIFE INCOME Ford Barrett Why it should go to banks, not individuals 60 PRICING BANK SERVICES Robert E. Knight It must be fair to banks and customers CONVENTIONS 37 NEW MEXICO 45 MISSISSIPPI 53 IN D IAN A 41 ARKANSAS 49 TENNESSEE 57 ILLINOIS 34 FIRST-TIMERS DEPARTMENTS 6 CO M M UNITY INVOLVEMENT 10 EFTS 14 NEWS 8 CORPORATE NEWS 12 SELLING/MARKETING 16 NEW PRODUCTS 18 INSTALLMENT LENDING ROUNDUP 21 INVESTMENTS STATE NEWS 76 ALA BAM A 77 KENTUCKY 78 MISSOURI 76 ILLINOIS 77 LOUISIANA 78 O KLA H O M A 77 KANSAS 77 MISSISSIPPI 78 TEXAS Editors Ralph B. Cox Editor & Publisher Lawrence W. Colbert Assistant to the Publisher Rosemary McKelvey Managing Editor Jim Fabian Associate Editor Daniel H. Clark Assistant Editor Advertising Offices St. Louis, Mo., 408 Olive, 63102, Tel. 314/ 421-5445; Ralph B. Cox, Publisher; Mar garet Holz, Advertising Production Mgr. Milwaukee, Wis., 161 W. Wisconsin Ave., 53203, Tel. 414/276-3432; Torben Soren sen, Advertising Representative. 4 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis MID-CONTINENT BANKER is published 13 times annually (two issues in May) by Commerce Publishing Co. at 1201-05 Bluff, 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. Subscription rates: Three years $21; two years $16; one year $10. Single copies, $1.50 each. Commerce Publications: American Agent & Broker, Club-Management, Decor, Life Insurance Selling, Mid-Continent Banker, Mid-Western Banker, The Bank Board Letter and Program. Donald H. Clark, chairman; Wesley H. Clark, president; Johnson Poor, executive vice president and secretary; Ralph B. Cox, first vice president and treasurer; Bernard A. Beggan, William M. Humberg, James T. Poor and Don J. Robertson, vice presidents; Lawrence W. Colbert, assistant vice presi dent. May 12-15: 28th Assembly for Bank Directors, Palm Beach, Fla., the Breakers. May 14-18: Mississippi Bankers Association Annual Convention, Biloxi, Broadwater Beach/Biloxi Hilton. May 15-16: ABA/ Insurance Industry Confer ence, Arlington, Va., Crystal City Marriott. May 15-17 : Tennessee Bankers Association An nual Convention, Gatlinburg, Sheraton Hotel. May 15-18: ABA National Operations/Automa tion Conference, New Orleans, Hyatt Regen cy. May 15-18: Arkansas Bankers Association An nual Convention, Hot Springs, Arlington Hotel. May 15-18: Bank Marketing Association Staff Sales Training Workshop, Phoenix, Del Webb’s Mountain Shadows Resort. May 15-20: ABA National Commercial Lending Graduate School, Norman, Okla., University of Oklahoma. May 15-20: ABA National Personnel School, Pittsburgh, Marriott Inn. May 15-20: Louisiana Banking School for Su pervisory Training, Lafayette, University of Southwestern Louisiana. May 17-20: Bank Administration Institute Com puter Performance Measurement Seminar, New York City. May 22-25: ABA National Conference on Real Estate Finance, San Francisco, St. Francis Hotel. May 22-25: NABW Southern-SoutheasternSouth Central & Florida Regional Con ference, Nashville, Hyatt Regency Hotel. May 22-27: Bank Marketing Association Es sentials of Bank Marketing Course, Boulder, Colo., University of Colorado. May 22-27 : Bank Marketing Association School of Trust Business Development & Marketing, Boulder, Colo., University of Colorado. May 22-28: Independent Bankers Association of America Seminar for Senior Bank Of ficers, Boston, Harvard Business School. May 22-June 3: Bank Marketing Association School of Bank Marketing, Boulder, Colo., University of Colorado. May 23-27 : Bank Administration Institute EDP Auditing Introduction II Short Course, Norman, Okla., University of Oklahoma. May 25-27: Bank Administration Institute Es tate Tax Planning Seminar, Memphis. May 30-June 1: American Institute of Bank ing Annual Convention, Phoenix, Hyatt House. June 2-3: Robert Morris Associates Com mercial Loan Training Program : Content and Methods Workshop, Washington, D. C., Key Bridge Marriott. June 3-10: ABA National School of Bank In vestments, Dallas, Southern Methodist Uni versity. June 5-7: Illinois Bankers Association Annual Convention, Chicago, Palmer House. June 5-17: ABA National Installment Credit School, Boulder, Colo., University of Colo rado. June 7-10: Bank Administration Institute Op erations Management I Short Course, Nor man, Okla., University of Oklahoma. June 8-10: Bank Administration Institute Money Transfer Seminar, Chicago. June 8-10: Association of Bank Holding Com panies, Annual Convention, Colorado Springs, Colo., Broadmoor Hotel. June 9-10: Robert Morris Associates Loan Quality Control Workshop, Philadelphia, Sheraton-Downtown. June 9-10: Robert Morris Associates Loan Quality Control Workshop, Philadelphia, Sheraton-Downtown. June 9-11: New Mexico Bankers Association Annual Convention. Santa Fe. Hilton ¿in. June 9-12: National Association of Bank Women Westem/Rocky Mountain Regional Conference, Reno, Nev., Pioneer Inn. June 12-15: Robert Morris Associates F i nancial Statement Analysis Workshop, Bos ton, Colonnade Hotel. June 15-16: Indiana Bankers Association An nual Convention, French Lick, French LickSheraton. June 16-17: Robert Morris Associates Foreign Credit Analysis Workshop, Chicago, Hyatt Regency O’Hare. June 20-22: National Association of Bank Women Lake/Midwest/North Central Re gional Conference, Indianapolis, Indian apolis Marriott Inn. June 22-24: Bank Administration Institute Current Bank Tax Problems Seminar, Den ver. MID-CONTINENT BA N K ER fo r May 1 5 , 1 9 7 7 You want a bank that can back you ...over-line or overseas. Count on the total capa bility of Mercantile Trust in St. Louis. We can provide the over line support you need to take advantage of big opportunities And we can support you with a full range of specialized services. For instance, our International Department can help you and your customers with overseas contacts, docu ments, financing, even customs services. When you have an opportunity that calls for something specialcall 314-425-2404. We’re w ith you. M =R cnm rii= BR fK M ercantile Trust Company N.A. • (314) 425-2404 • St. Louis, Mo. • M em ber F.D.I.C. MID-CONTINENT BA N K ER fo r May 15 , 1 9 7 7 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 5 Community Involvement New Junior Bankers' Leadership Special Energy Audits Are Offered Public by Chicago-Area Bank Group COMMUNITY-ACTION program —said to be the first of its kind in U. S. banking—gained momentum in March, when seven suburban Chicago banks began providing special energy audits to help the public conserve fuel. Suburban Bank Group of Palatine is offering the services of Thermography of Illinois, Inc., a Dundee, 111., firm with advanced-technology, in fr a r e d camera and television systems designed to detect heat loss in homes and busi nesses. An extensive promotional program undertaken by bank officials, which has attracted national media attention, has caused an initial onrush of requests for energy audits from throughout the Chi cago area. “The present energy crisis is so grave that we believe it particularly timely to offer such an audit to home owners,” says Gerald F. Fitzgerald, chairman, Suburban Bank Group. “Since the cost of this service is being kept to an abso lute minimum, it is the best return on investment that I can imagine.” For a $50 fee, Thermography of Illi nois uses its sophisticated infrared equipment to pinpoint exact areas of heat loss—in walls, ceilings, attics, floors or roofs—after which corrective measures are taken for m axim u m energy conservation. Bank officials are urging the public — whether customers or not— to visit one of the seven Suburban banks to sign a special “Energy Audit” form, with arrangements then made by the bank for convenient inspection time. Karl Reinke Jr., president, Ther mography of Illinois, Inc., said at a A These three p h o to s illustrate tech n olo gy, in fra re d cam e ra h om es a n d b u sin esse s. LEFT: seen b y n a ke d eye. CEN TER: screen b e fore in stallation o f 6 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Palatine briefing session that “a game plan to save both energy and money is what is needed now. With its energy audit program, Suburban Bank Group is taking the lead in its field—not only in offering customers a virtually guaran teed money-saving plan—but in help ing alleviate a national crisis.” Mr. Reinke said that his firm is “one of the very few in the U. S. to work on the principle that every object gives off infrared radiation according to its temperature. Those extrasensory levels are captured and translated into live video images that can be measured to 0.2 degrees centigrade.” At the Palatine session, where bank officials greeted the press, a statement applauding the suburban banking pro gram was read by Mr. Fitzgerald, is sued that morning by Senator Charles H. Percy (R.,I11.). In the statement, the Senator said he gave his “whole hearted and enthusiastic support in this important new undertaking.” Earlier, Senator Percy had invited Thermogra phy of Illinois to cooperate with his new Alliance to Save Energy organi zation that had just been launched. Mr. Reinke and his marketing director, Tom Skiles, have been working closely with Senator Percy’s energy office in conservation projects, including earlier participation in a national solar energy conference in Chicago. Developed only recently in the U. S., thermography is beginning to play a vital role in medicine, where it assists in the search for breast cancer. As sistance in early detection of strokes, hardening of the arteries and other circulatory problems are other medical h o w T h e rm o g ra p h y o f Illin o is' a d v a n c e d a n d T V syste m s can detect h eat lo ss in H ere a re ceiling, w a lls a n d light b u lb a s H e re 's sa m e scene on T h e rm o g ra p h y T V in su latio n. D a rk a re a in d icates cold a n d , The n e w officers o f the Ju n io r B a n k e rs Section o f the L o u isia n a B a n k e rs A sso c ia tio n confer a fter their election a t the Ju n io r B a n k e rs ' 20th A n n u a l S tu d y C on fe re nce and C o n v e n tio n (from I.): v.p.— H a ro ld E. E d w a rd s, cash., N a t 'l B a n k, B ossier City; sec.— R a y fo rd J. Sim on, G u a ra n t y B a n k, Lafayette; pres.— D o n L. B o rd e lon, v.p., G u a ra n t y B a n k, A le x a n d r ia ; a n d tre as.— Errol D e la h o u ssa y e , v.p., N e w Ib e ria N a t'l. applications. The P e n ta g o n also uses ther mography in projects including heat seeking and air-to-air missiles, among other classified operations. Aircraft de tection of potential forest fires, searchand-rescue missions and border in spection are other uses. Preventive maintenance in business is another major— and fast-spreading—:function. In thermography’s use by banks for the first time, officials in Palatine emphasize that the program is being offered as a public service and is not tied in any way to any accounts held by customers at participating banks. Besides Palatine National, other banks in the group are: Bank of Rolling Meadows, Cary State, Suburban Na tional, Palatine, Suburban Bank, Hoff man Estates, Suburban National, Elk Grove Village, and the recently char tered Suburban National, Woodfield. thus, h e a t-loss a rea . Light b u lb is b righ te st b e c a u se th a t 's w h e re m ost h eat is. R IG H T : This is sa m e im a g e on T V screen, but a s it a p p e a r s after in su la tio n. N o te in creased light area , w h e re n e w in su la tio n p re se rve s g re a te r a m o u n t o f heat th a n b efore insulation. MID-CONTINENT BA N K ER fo r May 1 5 , 1 9 7 7 Our portrait ram ■ uces new customers 9 “Any banker in the country loves to see prospects walk in the door— well that’s what the Olan Mills portrait program did for us. We are very pleased.” Tom Maxwell President Bank of Cannon County Woodburry, Tenn. Som e m arketing experts claim it can’t be done — that is, for the prospect to come to you rather than you going after him. Well we can show you how to get them to come in the door by the droves. O u r bank marketing program of giving away Free portraits (in beautiful color) to customers and prospects has proved to be one of the most successful programs yet. Here’s how it works. Olan Mills representatives will work out a schedule for your bank to give away beautiful color portraits to custom ers and prospects. They will help you plan, organize and advertise the program. They will take the pictures and send a follow-up team to show proofs. And the beauty of it all —- it doesn’t cost the customer a dime. Your only obligation is a nominal charge for advertising materials. Call us today. We’ll send a representative to see you. Additional information on The Olan Mills Family Portrait Plan is available from Olan Mills Bank Marketing Division, c /o Joe Trivett, 1101 Carter Street, Chattanooga, Tennessee 3 7 4 0 2 . Telephone (6 1 5 ) 6 2 2 -5 1 4 1 . Bank Marketing Division MID-CONTINENT BA N K ER fo r May 1 5 , 1 9 7 7 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 7 Prestige Programs Pay Roundup Specialists in □ Credit Life Insurance □ Credit Disability Insurance □ Personalized Claim Service □ Sales Training by Experienced Personnel • Scarborough & Co. Edward N. Murray has been named president, Scarborough & Co., Chicago, succeed ing Norman Clark. Mr. Clark resigned as president and CEO March 25, but plans to remain in the field of insurance for financial institutions. He had been with Scarborough since 1952. Mr. Mur ray formerly was vice president, Youngberg-Carlson Co., Inc., which, like Scarborough, is a subsidiary of GSI, Inc. Before joining YoungbergCarlson in 1962, Mr. Murray was ex ecutive vice president, J. H. Lea & Co., a subsidiary of Youngberg-Carlson. More Money in Your Pocket 200 West Higgins Road Schaumburg Illinois 60195 312 885 4500 IELIFE CREDIT LIFE Insurance Company v ■ ■ ■ MURRAY FREE...6 issues of Doane’s Farming for Profit, Over 800 banks send this leading newsletter to farm customers each month. It’s filled with facts to help farmers boost income. They appreciate the information and the bank that sends it. There’s no better way to show you’re the ag bank in your area. Your attrac tive bank heading appears on each issue — and you get exclusive use in your trade area. EVALUATE FARMING FOR PROFIT. Mail coupon or your name and letterhead for six issues . . . Free. YOUR NAM E TITLE CLARK • Mosler Safe Co. Franklin P. Weigold has been appointed vice president and general manager, Teller-Matic Sys tems Division, Milford, O. This is a division of Mosler Safe Co., Hamilton, O. Mr. Weigold joined Mosler from TRW Financial Systems Division, Or lando, Fla., where he was general man ager. Mosler’s Teller-Matic Systems Di vision manufactures and markets auto matic teller machines. • UMIC, Inc. This Memphis-based investment banking firm has made three appointments: Thomas E. Hollahan as operations manager, Willard G. (Buddy) Logan Jr. as a registered rep resentative and Joe Neff Basore Jr. as RANK N AM F ADDRESS ■ ■ CITY FARMING FOR PROFIT... ...a vital link between you and your farm community. STATE D DOANE ZIP Doane Agricultural Service, Inc. 8 9 0 0 M anchester Road St. Louis, Missouri 6 3 1 4 4 (3 1 4 ) 9 6 8 -1 0 0 0 W E IG O L D 8 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis HOLLAHAN MID-CONTINENT BA N K ER fo r May 1 5 , 1 9 7 7 B A SO R E SHREW D BUYERS AUTOM ATE W ITH AUTOM ATIC COIN WRAPPERS LO G AN an assistant underwriter. Mr. Hollahan formerly was with Mid-South Business Forms, A. S. Hart & Co., Inc., and, for several years, the Memphis Branch of the St. Louis Fed. Mr. Logan had been with Mark & Bensdorf, Inc., and Conti nental Assurance Co. Mr. Basore comes from Cooper Communities, Inc., a real estate development firm headquartered in Bella Vista, Ark. • Christmas Club a Corp. Gerald Bertello has been appointed account executive for northern Illinois by Christ mas Club a Corp., which is headquar tered in Easton, Pa. Prior to joining Christmas Club, Mr. Bertello was direc tor of marketing services for MitchelSteklof. ít r For taster service on A U TO M A TIC ONG CO IN W RAPPERS ■ Precision m ade on special m achines from fin e s t q ua lity m aterials. ■ "P atented Red Bordered W in do w s auto m a tica lly indicate the to ta l am ount and d enom ination of contents. ■ D iam eter of coin auto m a tica lly positions value of contents in red w in d o w openings. ■ Save tim e fo r tellers, buyers, stockkeepers and depositors. Elim inate errors. ■ For years a favorite w ith leading banks and fin an cia l institutions. ■ W rap all coins from 10 to $1.00 in fo llo w in g a m ounts: 5 0 0 in pennies $10 in quarters $2 in nickels $10 in halves $5 in dim es $ 2 0 in dollars ■ Packed 1 ,0 0 0 to a box. Tapered edges. Available Im printed. BANK CREDIT ■ INSURANCE m ■ ■ CALL THESE SPECIALISTS Harold E. Ball • Carl W. Buttenschon John E. King • Milton G. Scarbrough 214/748-9261 For d e tails on o th e r h igh q u a lity " S te e l- S tr o n g " Coin H andling Products, call yo u r de a le r o r send coupon. Foster (Horsey) Latimer Missouri General Agent The C. L. D O W N E Y C O M P A N Y INDUSTRIAL LIFE INSURANCE COMPANY 2808 Fairmount — Dallas, Texas 75201 / h a n n ib a l , M is s o u r i, d e p t . MC PLEASE SEND FREE DETAILS ON "STEEL-STRONG" COIN HANDLING PRODUCTS TO: N a m e _________________________________________________________ T i t l e F ir m ___________________________________________________ :_________________ A ddr ess._____________________________________ C ity _____________________________________________________________ S ta te . AROUND MID-CONTINENT BA N KER fo r May 1 5 , 1 9 7 7 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis MONEY THE FINEST IS " STE EL- STR O N G " 9 E P T S (Electronic Funds Transfer Systems) Breakfast at M cD onald's' Promotion Boosts Banks' A T M Usage Nearly 2 0 0 % OW do you take a predominantly older age group who is suspicious of newfangled electronic banking sys tems and get its members to use auto matic teller machines? Florida’s Southeast banks think they have found the answer: Appeal to their appetite. Nine of Southeast’s 47 banks, located on Florida’s west coast from Braden ton to Fort Myers, serve a market composed largely of people 65 and over. While the market area is one of the wealthiest in the state, its citizens are frugal. They make wide use of coupons offering cents off various prod ucts, and the area’s coupon-redemption factor runs two to three times the na tional average. They also share with older people everywhere an aversion to automated equipment, be it an elevator or an ATM. Faced with these market demo graphics, and with a monthly activity rate for transactions at its nine “To morrow Bank” ATMs far below the break-even mark of 3,000 per unit, Southeast’s director of marketing, Alan H Southeast Banks are g iving away coupons go o d for free breakfasts at M cDonald's Restaurants. Here's h o w it works: É| Southeast Banks "" You can count on us. F u ll-p a g e n e w s p a p e r a d s like this o n e a p p e a re d in local p a p e rs th ro u g h o u t a re a se rve d b y n ine S o u th e a st b a n k s on F lo rid a 's w e st c o ast d u rin g tie-in p ro m otion w ith M c D o n a ld 's re sta u ra n ts to b oo st activity a t b a n k s ' A T M s, called "T o m o r ro w b a n k s . " Fou r-w ee k p ro m otion b o o ste d A T M activity n e a rly 2 0 0 % . 10 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Stess, called in the Summit Group, a Miami-based marketing and promotion agency, for some creative problem solving. Summit’s solution: a tie-in promotion with local McDonald’s restaurants, of fering a free “Breakfast at McDonald’s” coupon in every cash envelope dis pensed via a Tomorrow Bank with drawal from checking, savings or a Master Charge cash advance. Results of the first phase of the pro motion, ending early in December, indi cated it was off to a resounding suc cess, with an almost 200% increase in ATM transactions. Says William E. Ellis, vice president, Summit Group: “We printed 10,000 coupons for the first week and found we didn’t have enough to handle the volume, so we re printed an extra 5,000 for each week of the program. Some McDonald’s in the area report they’re swamped with people redeeming their Tomorrow Bank coupons for a free breakfast.” All told, Mr. Stess says more than 50,000 coupons were dispensed through Tomorrow Bank ATM transactions by the time the first phase of the pro motion ended in early December. Explaining the strategy of the free breakfast tie-in with McDonald’s, Mr. Stess explained: “We know that this particular age group spends a pro portionately larger amount of time at meals than do younger people, and to them breakfast is a particularly im portant meal. So, we approached the McDonald’s people with the idea. It’s simple. We would supply the news paper, radio and other advertising and promotional support if they would supply the breakfast. They agreed.” The “Breakfast at McDonald’s” pro motion represents the initial phase of Southeast’s overall marketing plan to stimulate use of its Tomorrow Banks in Manatee, Sarasota and Lee counties. With a Tomorrow Card, the plastic “key” to the Tomorrow Bank, a South east customer may deposit or withdraw from checking or savings accounts or cross-transfer funds from one account to another. The card also may be used to make loan or Master Charge pay ments— all this, 24 hours a day, seven days a week, rain or shine, without ever having to go inside the bank or wait in line. Tomorrow Card trans actions are limited to three per day, or a maximum of $150 in withdrawals per day. But, as Mr. Stess explains, many of Southeast’s older customers apparently felt uncomfortable using the machines and not dealing directly with another person at the bank. The problem was, how do you get people to try the ATMs for the first time? Mr. Stess said the McDonald’s cou pon is succeeding beyond their best expectations. Supporting the coupons are blanket newspaper advertisements in nine local papers and extensive local radio advertising on six local stations. In addition, during banking hours the first week of the promotion, attractive picnic tables were located adjacent to the Tomorrow Bank machines, where customers were served juice, coffee and Danish while a demonstrator showed them how the equipment works and how to enter various transactions. Simi lar demonstrations were conducted the last week of November to coincide with the arrival of social security checks. Supporting the marketing effort were press releases, photos and captions sent to local newspapers, radio and TV stations describing the promotion and appearances by the locally popular “Miss Manatee” to banks in Bradenton, where she demonstrated how the ATMs operate. One key to increasing ATM usage, or course, is to increase the number of new accounts and cards in customers’ possession. Since the promotion began, more than 1,800 new Tomorrow cards have been issued. • • 'Cash M an' Introduced E d w a rd L. Stu a rt (I.), v.p. in c h a rg e o f the M ic h ig a n -A m e ric a n R o a d Office, D e a rb o rn , o f M a n u fa c tu re rs B a n k, Detroit, a ssists a custom er in the use o f the b a n k 's " C a s h M a n " A T M . The m a ch ine is d e sig n e d to help b a n k custom ers h o ld in g " C a s h M a n " plastic c a rd s to a v o id u n n e c e ssa ry w a its in tellers lines. " C a s h M a n " p ro v id e s ch ecking accou nt b a la n c e in fo rm a tion , a s w e ll a s w it h d ra w a ls from checking, s a v in g s o r M a s te r C h a r g e accounts. MID-CONTINENT BA N K ER fo r May 1 5 , 1 9 7 7 In correspondent banking services, we’re the specialists. Here’s how First Chicago, a $19 billion banking corporation, can help you serve your customers more productively. You know what your correspondent banking needs are. You also know what services your present correspondent bank provides. Check this list of First Chicago's com prehensive services. See if there aren't many ways we can work together more productively. Then call a correspondent banker at First Chicago, (312) 732-4101, or write us. DATA PROCESSING Point-of-Sale Techniques Bank Accounting Services Bank Information Systems Electronic Funds Transfers FOCUS: Lockbox Location Model Visual Aids: Slides and Closed Circuit TV Production TRUST BANKING Personal and Corporate Trust Services Trust Investment Advisory Services Monthly Investment Services Stock Transfer and Shareholders Services Dividend Reinvestment PERSONAL BANKING ASSISTANCE Bank Promotions YES Card'“ BankAmericard ® Savings Programs Automobile Leasing Program Bank-At-Work/Direct Deposit Program MANAGEMENT ASSISTANCE Loan Portfolio Review Techniques Economic Forecasting Profit Planning and Forecasting Marketing and Business Development Advice Personnel Assistance Operations Planning Organization Planning OPERATIONAL SERVICES Cash Letter Clearings: End-Point & Float Analyses Coin and Currency Collections Money Transfer Federal Reserve On-Line Settlement Securities Custody Security and Coupon Collection Payroll Accounting Student Loan Servicing INVESTMENTS Government Securities Municipals Federal Agency Securities Federal Funds Repurchase Agreements Commercial Paper Certificates of Deposit Treasury Tax and Loan Accounts Money Desk Reviews Portfolio Analysis Services SPECIAL CORRESPONDENT SERVICES Annual Correspondent Conference Account Referrals Mini-conferences and Workshops, Special Events Planning Record Retention and Reconstruction Cash Management Consulting: Collection, Concentration, Disbursement and Control INTERNATIONAL BANKING Worldwide Locations Merchant Banking Money Market Instruments Letters of Credit Foreign Exchange Transactions Transfers and Remittances Ex-Im Financing CREDIT FACILITIES Holding Company Lines of Credit Participations: Upstream and Downstream Intermediate Term Credit Liquidity Lines of Credit Commercial Finance Services: Inventory and Receivable Financing Corporate Financing Advisory Services Leasing Activities and Analysis Credit Information Small Business Administration: Loan Counsel MEMBER FDIC MID-CONTINENT BA N K ER fo r May 1 5 , 1 9 7 7 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis II Selling / Marketing Corporate— Not Retail— Marketing Is Aim of New A B A Subcommittee SPECIALIZED subcommittee de voted to corporate marketing has been formed by the American Bankers Association. According to Subcommittee Chairman David E. Gile, senior vice president, Marine Midland Bank, New A York City, the subcommittee will con centrate on “the marketing of non-re tail services to non-retail customers, in cluding correspondent banks.” Bank marketing, historically, has been retail oriented, Mr. Gile says. The Let our billion dollar organization help your bank profit. Call Chuck Allen (205/328-0300), a member of our correspondent banking team. First Alabama Bancshares, Inc. Affiliate Banks First Alabama First Alabama First Alabama First Alabama First Alabama First Alabama First Alabama First Alabama First Alabama First Alabama First Alabama First Alabama First Alabama Bank of Montgomery, N.A. Bank of Birmingham Bank of Huntsville, N.A. Bank of Tuscaloosa, N.A. Bank of Dothan Bank of Selma, N.A. Bank of Gadsden, N.A. Bank of Athens, N.A. Bank of Baldwin County, N.A. Bank of Guntersville Bank of Hartselle Bank of Phenix City, N.A. Bank of Mobile County ABA hopes, he adds, that the subcom mittee’s work will awaken an interest in and understanding of the potential for increasing business and profits through a concerted “marketing-tobusiness” effort. The subcommittee plans to assist marketing professionals in developing skills and knowledge of accepted cor porate bank marketing principles. It also hopes to develop aids and tech niques to assist bank marketers in set ting up corporate marketing functions within their banks and to help market ers keep abreast of new corporate prod ucts within the market. One of the subcommittee’s first proj ects has been to suggest and assist in putting together plans for a threecourse “Mini-College of Corporate Marketing,” which was held during the ABA’s 1977 National Marketing Con ference at the New Orleans Hyatt Re gency in April. During the course, a panel established the need for “market ing to business” in the economic clim ate that currently prevails. In addition, three special-interest sessions focused on situation analysis and setting goals and objectives, development of cor porate marketing strategies and tactics —including market segmentation and marketing mix, and measurement and evaluation of the program for revision and refinement of the marketing plan. Also serving on the subcommittee is Craig R. Carpenter, vice presidentcommercial bank services, Continental Bank, Chicago. For additional information about the corporate marketing subcommittee, write Bert Auer, assistant director, Marketing Division, American Bankers Association, 1120 Connecticut Avenue, N. W., Washington, DC 20036. • • Harbinger of Spring C o m m u n ity offices o f E q u ib a n k , P ittsburgh, b lo o m w ith the first s ig n s o f s p r in g — d a ffo d ils— a s J o a n N e u b e rg e r (r.), teller, M id t o w n Office, g iv e s a token o f the n e w s e a so n to custom er D a n Fornear. The b a n k p u rch a se d the flow e rs from the A m e ric a n C a n c e r Society, w h ich w ill u se the fu n d s fo r cancer control, research a n d education. 12 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis MID-CONTINENT BA N K ER for May 1 5 , 1 9 7 7 “ THEM OLD COTTON FIELDS DOWN HOME" are still going strong. So are Mississippi’s efforts at industrial expansion and in state processing of our agricultural products and timber resources for increased sales on the international market. We’ll bet you don’t know all the facts about the good things we're doing in Mississippi. Find out more from 1 First National Bank ••• you’ll be interested in what you hear. 1jckson, Mississippi Member FDiC MID-CONTINENT BA N K ER fo r May 1 5 , 1 9 7 7 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 13 NEWS ROUNDUP News From Around the Nation Bill to Expand CU Services Passed Legislation has passed Congress that would permit fed erally chartered credit unions to offer the following ser vices : Residential first mortgages for up to 30 years on a CU member’s principal dwelling place; loans on mobile homes or home improvements for up to 15 years; longer terms for secured and unsecured loans; no limit on the amount that can be borrowed on an unsecured basis; revolving lines of credit and issuance of credit cards. Sixteen states now permit state-chartered CUs to exer cise the same powers won by federal CUs. Higher Interest for IRA s The Fed and FD IC have taken action to eliminate the one-quarter percent interest rate differential between banks and thrifts for individuals participating in individual re tirement accounts and Keogh plans. Effective July 6 (unless Congress moves to delay the date), commercial banks will be able to offer a rate of 7.75% on such plans by means of a new category of time deposit account that requires no minimum denomination with a maturity of three years or more. Withdrawals can be made before maturity if the depositor is 59/2 years of age or is disabled. Banks can modify existing IRA or Keogh plans to permit savers to take advantage of the new category. The agencies expect the new category to encourage addi tional eligible people to open such accounts. The equaliza tion of the interest rate is expected to encourage banks to promote the accounts more vigorously. Truth-in-Lending Overhaul Planned The Senate Committee on Banking, Housing and Urban Affairs is planning to amend the Truth-in-Lending Act to solve unforeseen problems that have arisen since its imple mentation in 1968. Purpose of the act was to require lenders to state in writing the interest rate borrowers would be required to pay. Instead, the complicated wording of the act has set the stage for numerous lawsuits in areas not directly relat ed to the intent of the law. One such area is what hap pens when the debtor defaults. Attorneys have been ac cused of taking advantage of the complexities of the law to flood the courts with fee-generating cases. Foreign Loans No Problem, Says Treasury U. S. banks are not becoming overexposed in their for eign loans, said a Treasury official recently. Fears about the quality of such loans have been expressed by Fed 14 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Chairman Arthur Burns, who told a Senate committee re cently that U. S. bank loans to poorer lands can’t continue at the rapid pace of recent years. The Treasury spokesman said losses on foreign loans have been small but prudence dictates that increases in International Monetary Fund resources be considered so that more of the international lending risk can be assumed by the IM F. Redlining Curbs Instituted Regulatory agencies have adopted redlining disclosure regulations that force banks to provide census tract infor mation so locations where lenders are placing mortgage loans can be identified. Although banks have begun identifying the census lo cations of mortgage loans publicly, data for streets and neighborhoods within the greater tract remain confiden tial. The Federal Home Loan Bank Board is working on red lining regulations for thrifts. CofC O K s BofA Mortgage Plan A proposal to bring additional funds into the home mortgage market has been approved by the Comptroller of the Currency. The plan, proposed by Bank of America, San Francisco, is to sell participations in a pool of the bank’s mortgages. The pool will consist of conventional real estate loans on single-family homes. The participations, which will be sold in large denominations to institutional investors, are of the “pass-through” type, entitling each holder to receive the appropriate share of principal and interest payments received by the pool. The Comptroller has noted that the bank’s plan should impact favorably the nation’s housing market in general. He said he hoped that it would be particularly favorable to the availability of mortgage funds in some urban areas. S& L-Bank Interlocks Held Illegal A Federal Trade Commission administrative law judge has ruled that interlocks between banks and S&Ls are il legal. The decision was handed down in a test case against Perpetual Federal Savings, Washington, D. C., filed by the FTC. The S&L was sued because it shared seven directors with three local commercial banks. “Interlocking directors among these competing firms in herently create risks of anticompetitive effects; this un fair practice must cease in the public interest,” the judge said. MID-CONTINENT BA N K ER fo r May 1 5 , 1 9 7 7 NATIONAL DETROIT CORPORATION kr L> I Parent Company of NATIONAL BANK OF DETROIT March 31,1977 CONSOLIDATED BALANCE SHEET (dollars in thousands) ASSETS Cash and Due from Banks (including Foreign Office Time Deposits of $ 6 8 2 ,4 7 8 )...................... ......... .. Money Market Investments: Federal Funds S o ld ........................ Other Investments........... .............. Robert M. Surdam Chairman of the Board $1,744,993 1,818 Norman B. Weston Vice Chairman of the Board A. H. Aymond C h a irm an Consumers Power Company Henry T. Bodman Former Chairman—National Bank of Detroit Harry B. Cunningham 817,239 813,216 38,533 1,668,988 Loans: Commercial.................................... Real Estate Mortgage..................... Consumer ...................................... Foreign O ffic e ................................ 1,890,695 765,071 268,969 432,342 3,357,077 Less Reserve for Possible Loan Losses ................................ ....... 50,621 3,306,456 Honorary Chairman of the Board— S. S. Kresge Company David K. Easlick President—The Michigan Bell Telephone Company Richard C. Gerstenberg Director and Former C h a irm an General Motors Corporation Martha W. Griffiths Griffiths & Griffiths John R. Hamann President— The Detroit Edison Company Robert W. Hartwell President—Cliffs Electric Service Company Joseph L. Hudson, Jr. Bank Premises and Equipment (at cost less accumulated depreciation of Chairman— The J. L. Hudson Company 65,877 134,234 $7,596,779 $43,530) ................................................. Other Assets ...................................... Total A ssets..................... Deposits: D em and.......................... .............. Certified and Other Official Checks Individual Savings.......................... Individual Time .............................. Certificates of Deposits................. Other Savings and T im e ................. Foreign O ffic e ................................ Walton A. Lewis President—Lewis & Thompson Agency, Inc. Don T. McKone President— Libbey-Owens-Ford Company LIABILITIES AND SHAREHOLDERS’ EQUITY Shareholders’ Equity: Preferred Stock—No Par Value........ No. of Shares Authorized 1,000,000 Issued — Common Stock—Par Value $ 6.2 5... No. of Shares Authorized 20,000,000 Issued 12,151,882 Capital S u rp lu s ................................ Retained Earnings............................ Less: Treasury S to c k 102,808 Common Shares, at cost Total Liabilities and Shareholders’ Equity Charles T. Fisher, III President 382,775 291,638 674,413 Trading Account Securities—At Lower of Cost or M arket.......................... Investment Securities—At Amortized Cost: U.S. Treasury.................................. States and Political Subdivisions... Federal Agencies and Other........... Other Liabilities: Short-Term Funds B orrow ed .......... Capital Notes .................................. Sundry L ia b ilitie s ............................ Total L ia b ilitie s ........................ BOARD OF DIRECTORS Ellis B. Merry $1,739,616 370,656 1,463,881 829,139 382,487 205,715 1,052,691 6,044,185 $828,943 95,322 150,184 $ Former Chairman—National Bank of Detroit Arthur R. Seder, Jr. President— American Natural Resources Company Robert B. Semple Chairman—BASF Wyandotte Corporation Nate S. Shapero Honorary Chairman and Director and Chairman of Executive Committee— Cunningham Drug Stores, Inc. George A. Stinson Chairman—National Steel Corporation 1,074,449 7,118,634 Peter W. Stroh President—The Stroh Brewery Company — ADVISORY MEMBERS Ivor Bryn Former Chairman—McLouth Steel Corporation 75,949 William M. Day Former Chairman—The Michigan Bell Telephone Company 178,729 225,784 (2,317) A. P. Fontaine Former Chairman— The Bendix Corporation 478,145 $7,596,779 Ralph T. McElvenny Former Chairman— American Natural Resources Company Peter J. Monaghan Monaghan, Campbell, LoPrete & McDonald George Russell Assets carried at approximately $371,000,000 (including U.S. Treasury Securities carried at $54,000,000) were pledged at March 31, 1977, to secure public deposits (including deposits of $61,789,167 of the Treasurer, State of Michigan) and for other purposes required by law. Former Vice C h a irm a n General Motors Corporation Outstanding standby letters of credit at March 31, 1977 totaled approxi mately $15,500,000. MID-CONTINENT BA N K ER fo r May 1 5 , 1 9 7 7 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 15 New Products and Services • Actron, Inc. A new queue system from Actron, Inc., Arlington Heights, 111., is said to assure “first-come-firstserved” service at tellers windows. The system’s components consist of stan chions, which are available in satinchrome, brass or statuary bronze, and roping in leather-like vinyl or nylon velour in a number of colors. The sys tem, according to the manufacturer, will eliminate the frustration customers experience when selecting a teller line with the extended transaction. Actron offers a brochure illustrating steps for laying out such a system and offers its engineers’ assistance in designing un usual layouts. Write: Actron, Inc., 810 East Crabtree, Arlington Heights, IL 60004. • Banker’s Systems, Inc. A booklet entitled “What Does This Emblem Mean to You, Our Depositor?” now is Traffic-Control Brochures ElecTroteC, Inc., Elk G ro v e V illa g e , III., h a s p u b lish e d this fo u r-v o lu m e series o f illustrated b ro ch u re s d e ta ilin g its com pete line o f in sid e a n d ou tsid e traffic-control syste m s fo r use in fin a n cia l institutions. In clud e d a re a line o f so la r screen sign s, the firm 's B A N K o n t r o l system fo r d riv e -u p in sta lla tion s, solid -sta te lo b b y control w ith liq u id -c rysta l d is p la y a n d the ETC D riv e -U p A le rt System . W rite: ElecTroteC, Inc., 71 G o rd o n Street, Elk G ro v e V illa g e , IL 60007. available from Banker’s Systems, Inc., St. Cloud, Minn. Its purpose is to help acquaint bank customers with the FD IC , and it contains illustrations and examples of different account combi nations that would provide maximum deposit insurance through the FD IC . A bank’s name may be imprinted on the booklet’s cover, or it can be ordered unimprinted. Its publisher points out that its size— 2/4x5% inches—makes it an ideal statement stuffer or over-thecounter handout. Write: Banker’s Sys tems, Inc., P. O. Box 1457, St. Cloud, MN 56301. • Security Engineered Machinery Co. A line of disintegrators has been announced by Security Engineered Machinery Co., Westboro, Mass. The devices are able to turn microfilm, microfiche, unburst computer print out, bound manuals and offset plates into miniature confetti. The smallest unit in the line is the Model 700, which is file-cabinet size, while the firm’s largest unit, the Model 1424 (pic tured), will destroy up to 2,000 pounds of material per hour. Other models are available. A vacuum system, built into FARMERS GRAIN AND LIVESTOCK FGL Will Help You » î m ■ ■ ■ ■ ■ ■ ■ ■ each unit, automatically compacts and bags waste material, eliminating fire hazards and disposal problems, accord ing to the manufacturer. Write: Securi ty Engineered Machinery Co., Inc., 5 Walkup Drive, Westboro, MA 01581. The Marketing Advisory Service . . . 1 . Increase th e vo lu m e o f y o u r loan p o rtfo lio . 2. Increase p ro fita b ility and stability. 3. D evelop c re d ib ility and leadership in th e ag co m m u n ity. 4. Provide m arke tin g expertise to y o u r Clients. G IV E FGL A CA LL . . . (515) 223-2200 1200 35th Street, West Des Moines, Iowa 50265 I6 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis MID-CONTINENT BA N K ER fo r May 1 5 , 1 9 7 7 Depend on the bank that other bankers depend on. The Whitney doesn’t want you to feel let down when you think about correspondent banking in the part of the South that we know best. We’ve been holding up our end with other banks all over the world since 1883. Perhaps now we can join with you to build a firm foundation of correspondent banking for the future. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis NATIONAL BANK OF NEW ORLEANS Reliability in banking since 1883 Installment Lending Consumer-Compliance Program Begun By Federal Reserve for Member Banks PROGRAM designed to improve compliance by Fed-member banks with consumer-credit-protection laws and regulations has been established by the Fed. The system-wide program is called “Consumer Compliance and A nnnnnnn iD Pi FOR THE RIGHT MAN r rrrr^ rr f.'T.OR THE RIGHT JOB n if ... executive personnel ^ I for banking, finance and related fields contact TOM CHENOWETH, I i j | manager I* FINANCIAL?' PLACEMENTS^' '9 Î 2 Baltimore, Kansas City, Mo. r i _L phone 816 421-7941 18 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Education Program of the Board of Governors of the Federal Reserve Sys tem” and has two main parts: • A program designed to educate all member banks, both state and na tional, in requirements of consumercredit-protection laws. • A companion program to conduct special examinations of state-member banks to assess compliance with con sumer laws by examiners especially trained for that purpose. The following procedures will be fol lowed at state-member banks: Exam iners who find what they regard as evi dence of discrimination in credit trans actions will report all findings to the appropriate Federal Reserve bank. The Reserve bank, in consultation with the board’s Division of Consumer Affairs, will determine whether additional in vestigation is needed and what, if any, corrective measures are appropriate. In the event of overcharges, the bank generally will be required to re imburse customers for the amount of the overcharge. Consumers will bë giv en an explanation of the overcharge for which restitution is required. In other cases of violations, statemember banks will be instructed to make prompt correction of their poli cies, practices, procedures or forms so as to avoid similar future violations. In all violation cases, the examiners’ findings will be made known to the boards of the banks involved. Special examinations will assess com pliance with the following laws and regulations for which the F R B has en forcement responsibilities with respect to state-member banks: Fair Credit Re porting Act, Fair Housing Act, Real Estate Settlement Procedures Act, Reg ulation B (Equal Credit Opportunity A ct), Regulation C (Home Mortgage Disclosure A ct), Regulation Z (Truthin-Lending, Fair Credit Billing and Consumer Leasing acts), Regulation A (Unfair and Deceptive acts and Prac tices by Banks and Handling of Con sumer Complaints), Regulation H (Na tional Flood Insurance) and Regulation Q (interest on deposits). Any new consumer laws or regula tions affecting state-member banks for which the board is given enforcement authority will be incorporated into the special consumer-affairs-compliance ex aminations. The special examinations are to be uniform among all Federal Reserve banks. E ducation Program. The board has directed each Reserve bank to establish an educational and advisory service for all member banks (including national banks). To carry out this program, each Reserve bank will be prepared to send a specialist to any member bank that requests such a service. Purpose of the visits is to help member bankers develop appropriate policies, proce dures and forms in the consumercredit-protection area and to answer questions bank personnel may have re garding the consumer-credit-protection laws and regulations and compliance with them. In most cases, these specialists will receive special training through attend ance at Consumer Affairs schools at the Federal Reserve Board. • • Car Loans for 42-60 Months Reported in ABA Survey WASHINGTON, D. C.—A national banking survey made by the ABA shows that 77.4% of the responding banks are making auto loans for 42, 48 and even 60 months, instead of 36 months. Fifty percent of the banks reported they are making four-year loans; some 27% are making 42-month loans, and .4% are offering five-year loans. Only 22.6% are still limiting new-car loans to 36 months. Two years ago, 91% of all direct new-car loans were for 36 months or less. The ABA survey also reports that 96% of the nation’s 14,700 banks are expanding their new-car-loan volume. Banks currently provide more than half — $35.1 billion— of the total outstand ing consumer credit in new-car loans. The annual interest rate on 36month auto loans averages 11.04% at banks and 13.21% through finance companies. The ABA says national av erages aren’t available for credit un ions, but their interest rates usually are competitive with those of banks. Inter est rates on car loans of more than 36 months normally are slightly higher for all lending institutions, says the ABA. MID-CONTINENT BA N K ER fo r May 1 5 , 1 9 7 7 Somebody has to set the standards« Churchill Downs. The Kentucky Derby. The first leg of racing's Triple Crown. And, by a long shot, the most coveted. It’s the standard. SALES HDQTRS • P.O. BOX 3399. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Others point to it, com pare to it, seek to achieve it. But there is only one Derby. There is only one Deluxe. We've chosen to follow our own lead, to set tough quality standards for ourselves. We’re willing to pay the price of excellence because anything less is more than we can afford. D E L U X E CHECK PRINTERS, INC. ST. PAUL, WIN 55165 • STRATEGICALLY LOCATED PLANTS FROM COAST TO COAST Half a loan is better than none. Here's a basic, bread-and-butter suggestion to pull in a loan you might otherwise have to pass up. Call on Citibank for fast, flexible participation. Our lending resources can extend your own, never disturbing the bank-customer relationships you now enjoy. We share the loan—you get the credit. Write our Correspondent Bank Department, 399 Park Avenue, New York, N.Y. 10022. Or call (212) 559-4889. Its good business, no matter how you slice it. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Citibank, N.A. Member FDIC Bank Investments Greater Disclosures on Municipals Being Demanded by Underwriters By HERBERT P. DOOSKIN, CPA Alexander Grant & Co., Inc.* Chicago NE N EED only mention disclosure in connection with municipal bond O issues to some bankers, and they’ll re mind you that banks have been invest ing in municipals for a long, long time, using their firsthand knowledge of \ the government a unit in question to ■fe^ judge the merits of Wm% each issue. Of course, the rating services help, too. Indeed, some of us find truly awesome the amount and sub D O O S K IN tlety of informa tion that can be imparted in the one, two or three letters of a bond rating. Because these have worked so well, it has been possible for leading finan cial institutions to place both faith and funds in billions of dollars worth of municipals, evidently having little need for any more information than the rou tine, four-page statement that has been traditional for an issue of general obli gation securities. In the aftermath of New York City’s near default on its general obligation bonds, however, underwriters have be gun demanding more disclosure in mu nicipal bond issues. To get their bonds to market, municipalities have com plied with the pressures of practicality and accompany their four-page state ments with a good deal of off-balancesheet data like population figures, growth indicators and other statistics to bolster the promise of future pros perity for an area in which general ob ligation or revenue bonds are offered. Well and good. If the market de mands more information than an A or B or AAA can provide, municipalities undoubtedly will have to provide it. Meanwhile, municipal finance officers must pursue their efforts to clarify the information they present. So long as the balance-sheet orientation of mu nicipal government requires detailing * Alexander Grant & Co. is the ninth lar gest CPA firm in the United States. the operations of hundreds of separate funds, there can be no consolidation of financial information. Moreover, the detailed financial statements provided by a major city— often running to hun dreds of pages— are more bewildering than informative and far less satisfac tory than the typical 10-page annual report of a commercial firm. Even correcting this won’t be enough. There’s another problem: If a financial institution has pur chased the general obligation bonds of New Harmony, Neb., maturing 30 years hence, how long should the bank hold them? What’s going on in New Harmony during the 18th year? Or the 22nd? Unless a new bond issue has in tervened, the only piece of information available to the bank is likely to be that original, four-page statement or, perhaps, an updated rating. Some larger institutions have begun seeking more; they have set up their own systems of portfolio management so as to evaluate more critically than before the issues they hold. (Long be fore New York City’s financial difficul ties became public knowledge, a lead ing Chicago bank is said to have sharp ly reduced its holdings of New York City bonds, basing the move on its own study of financial problems looming in the larger city.) " If a financial institution has purchased the general obligation bonds of N ew Harmony, Neb., maturing 30 years hence, how long should the bank hold them? What's going on in N ew Har mony during the 18th year? Or the 22nd?" Increasing numbers of financial insti tutions will have to undertake such studies. Not only the underwriting banks will be affected, but all those that buy and hold municipal issues. They must begin to study their mu nicipal holdings continuously, just as they do with assets of their loan cus tomers, in order to know whether and which to hold or to sell. Other investors and institutions, of course, will follow suit. The secondary market in municipals exists, even now, and seemingly investors get along on little more knowledge than the rating, MID-CONTINENT BA N K ER fo r May 1 5 , 1 9 7 7 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis minimal as that seems. Yet, considering that many munici pal issues are long-term bonds, addi tional disclosure in the initial sales document is far from being the only in formation needed; the investor should have a source of current information about these bonds. This is not to sug gest that municipalities must put out anything comparable to a corporate an nual report in connection with each bond issue, for, as a matter of practice, a preponderance actually are held to term. Still, investors must face the fact that defaults do occur. Rare as they have been in the case of general obli gation securities, municipal enterprise bond defaults are more numerous on the record, no harder to find than Chi cago’s Calumet Skyway bonds or those issues to finance the Chesapeake Bay Bridge tunnel. While acute observers of municipal finance have their own rules of thumb for determining a city’s fiscal well being, and surely many large financial institutions have similar criteria in use in their municipal bond departments, it seems inevitable that the next major step for issuers of municipals will be a means of providing clearly under standable information about each issue — and then continuous information about itself, as well. Major impetus toward greater dis closures by municipalities has been the effort by the Municipal Finance Offi cers Association (M FOA) to develop guidelines for disclosures. In late 1975, the MFOA issued a draft of its “Dis closure Guidelines for Offerings of Se curities by State and Local Govern ments.” Although the guidelines were voluntary and remained in draft status throughout 1976, a vast number of governmental units chose to comply and make the recommended disclo sures. The guidelines were put in final form in early 1977. These voluntary guidelines could be come mandatory if the bill introduced by Senator Harrison Williams (D., N .J.), and Representative John Mur phy (D.,N .Y.) passes. The bill would require disclosures similar to those adopted by the MFOA for all offerings above a certain amount. Additionally, the proposed law would require an nual reports of governmental issuers. 21 Murphy Brock Cat left), Vice President and Jim McKenzie Cat right), Asst. Cashier of Liberty Bank, correspond per sonally with Bobby M. Jenkins Ccenter), Vice President and Cashier of the National Bank of Middlesboro, at the bank’s main office. 22 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Liberty National Bank and Trust Company of Louisville MID-CONTINENT BA N KER for May 1 5 , 1 9 7 7 J A M E S E. S M IT H joined First C h ic a g o Corp. last N o v e m b e r 1 a s e.v.p. H is 2 1 -y e a r b u sin e ss career h a s included three y e a rs a s C om p troller of the C urrency, e n d in g w ith his re sign a tio n from that p ost in July, 1976. He a ls o h a s been u n d e r secre ta ry o f the T re a su ry a n d spe cial a ssista n t to the secre tary fo r co n g re ssio n a l re la tions. In a d d ition , M r. Sm ith h a s been A B A d e p u ty m a n a g e r a n d a sso cia te fe d eral le gisla tiv e counsel. What Supervisory Changes Lie Ahead And How Soon Will They Occur? NY D E F IN IT IV E treatment of the future trends for banking regula tion and supervision would require a book-length presentation. It would de mand an exhaustive review of the con siderable volume of technical and scholarly literature that’s been written on the many elements of this broad subject matter over the last 10 years. This author has neither the talent nor the time for such an effort, and, more importantly, the invitation to write was for a magazine article. Accordingly, what follows hits the high spots and presents more opinion than analysis. The article admittedly is speculative. The conclusions presented represent an effort at distilling the studies and opin ions of experts, to whom the author reg ularly looks for guidance, coupled with some viewpoints developed through nearly 15 years of working contact with the banking industry. In hitting the high spots, this article will confine itself to three key aspects of our unique system of regulation and supervision of banking; namely, tradi tional constraints on competition, struc ture of the regulatory and supervisory agencies and methodology of bank su pervision and examination. In each of these three areas, an effort will be made to assess the probabilities of im portant change over the next five to 10 years. Constraints on Com petition. Histor ically, the statutes, both federal and state, mandating and authorizing vari ous forms of regulation of the busi ness of banking have had the common objective of maintaining a safe and sound banking system. This is so be cause of the unique role banks play in our economy as a repository of other people’s money, as a major source of By JAMES E. SMITH Executive Vice President First Chicago Corp. Chicago business and individual credit and, col lectively, as the principal service mech anism for a national payments system. It’s likely that a healthy concern for safety and soundness will continue to influence importantly the public-policy decisions as to the substance and form of governmental regulation of banking. Statutory constraints on free compe tition in banking (restrictions on entry, limitations on territorial expansion, pro hibitions and limitations on payment of deposit interest) were enacted because such constraints were deemed essential to sustain a sound banking system. Much of this law came on the statute books in the aftermath of the economic cataclysm of the early 1930s. There’s growing evidence that the underlying rationale for many of these statutory constraints on competition has diminishing validity in the modern en vironment of financial-institution regu lation and supervision. In terms of gov ernmental intervention on the process of banking, it would appear that the most consequential activities producing a sound and stable banking system are Federal Deposit insurance, effective su pervision, Federal Reserve liquidity sup port and diligent antitrust enforcement. We have just come through the most trouble-ridden period in American bank ing since the ’30s. All things considered, those problems were treated with re markable success. That success in no way is attributable to the statutory con straints on free competition in banking. Indeed, within the experience of the MID-CONTINENT BA N K ER fo r May 1 5 , 1 9 7 7 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis author, the statutory restrictions on branching and multi-office banking were directly responsible for preventing op timal protection of depositors in one failing bank situation and might have produced the same unhappy result in some other cases. If these statutory constraints on competition no longer are usefully ful filling the public-policy objectives that caused their enactment, logic would suggest that they are vulnerable to change or repeal in the foreseeable fu ture. There are other straws in the wind to support the conclusion that change is in the offing. Consumers of banking services are awakening to the fact that the limita tions and prohibitions on the payment of interest on deposits are costing them dearly in terms of a fair return when compared with prevailing market rates. A recent study by an economist in the Office of the Comptroller of the Curren cy has pegged that cost for the past eight years in excess of $20 billion. Consumers not only are becoming more aware of such practices and their ef fects, they are organizing to become in creasingly effective in legislative ac tion. Similarly, neighborhood-improvement organizations in the larger metropolitan areas are taking a hard look at our fi nancial system and are raising ques tions as to how effectively the system serves their needs for banking and credit services. It’s inevitable that such interest and inquiry will bring these proponents for change face to face with the consummate illogic of retaining public laws that diminish the quality and quantity of banking services to achieve a public benefit, which, in fact, is fully achievable by other more ac- 23 " Unquestionably, the events of 1973-75 revealed some weaknesses in supervisory performance just as they reflected some mistakes of judgment in bank management. However, solutions are not to be found in restructuring, but rather in modernizing reforms of agency supervisory practice ceptable means. Here, again, are or ganizations that are gaining impressive skill in the exercise of political power. Certainly, these constraints on compe tition will not come tumbling down all at once. Nor should they, for the bank ing system will require some reasonable period to adjust to new statutory ground rules. But a momentum for change is underway, without question, and that momentum will produce a systematic reduction in the constraints on competition over the next five years. Regulatory-Agency Structure. The difficulties faced in the banking indus try throughout 1973, 1974 and 1975 brought with them criticism of the per formance of the federal bank regulatory agencies. Predictably, there came, too, renewed proposals for restructuring the regulatory agencies, including recom mendations that all agency functions be consolidated into a single agency. Serious efforts were undertaken in Congress throughout 1976 to obtain legislative directives for restructuring, including total consolidation. Those ef forts occurred in a climate of great pub lic speculation about the soundness of the banking system engendered by front-page stories and lead articles in major metropolitan newspapers and prominent business and financial jour nals. It was suggested, none too subtly, that we were on the brink of a major banking crisis. Even with this background chorus of ill-founded crisis speculation, Congress wisely (in the author’s view) rejected any radical restructuring of the regula tory agencies. Those efforts, doubtless, will be made again in this Congress, but success is unlikely. Unquestionably, the events of 197375 revealed some weaknesses in super visory performance just as they reflected some mistakes of judgment in bank management. However, solutions are not to be found in restructuring, but rather in modernizing reforms of agen cy supervisory practice. In an altogether proper exercise of its legislative oversight responsibilities, Congress directed the General Account ing Office, the congressional watchdog agency, to undertake a thorough re view of the regulatory and supervisory performance of the banking agencies. That study has been completed, and its recommendations have been presented 24 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis to Congress. That report gets at the heart of the matter. It recommends modifications concerning procedures employed by the banking agencies to monitor and evaluate the continuing condition of banks. Its proposals go to the substance of bank supervisory prac tice rather than to the agency configura tion from which that supervision and examination are conducted. The GAO report acknowledges that, in the main, results achieved by the bank agencies have been quite satisfactory. It also takes note specifically of the many mod ernizing reforms that already are being undertaken. The GAO has urged greater coordination and cooperation among the three agencies, but the closest the GAO comes to recommending structural re alignment is to support a proposal of the Fed for a statutorily constituted Federal Bank Examination Council to serve as a coordinating mechanism in developing uniform examination prac tices. If one looks at the record of banking in the post-World W ar II era compared with the performance of other highly regulated industries, banking must re ceive very high marks in terms of inno vation and responsiveness to change. It’s doubtful that such innovation could have taken place in the close-order drill that seems to be associated with the monolithic regulatory structures im posed on other industries. Additionally, because of the taproot nature of the banking and credit func tion in our private economy, there’s sound basis for concern should govern mental regulatory authority over that essential function be centered in a sin gle agency. None of the proponents of agency consolidation have yet been able to document any tangible benefits that might flow from consolidation. It’s even doubtful that consolidation would pro duce anything in the way of real budget ary savings. There still would remain 15,000 banks to be examined; insurance and liquidation functions of the FD IC still would have to be performed; and the discount function and administra tion of reserve requirements would necessitate the continuing involvement of the Fed and the system’s district banks. If, as is true, the present agency structure of bank regulation and super vision has produced good results, what common-sense reason can there be to adopt changes, which will further cen tralize governmental power? Thus far, proponents have produced no persua sive arguments for consolidation; they have developed no grass-roots support, and, therefore, it is difficult to conclude that their proposals have any strong chance for success. M ethodology o f Supervision an d Ex amination. The preceding section notes that the banking problems of the ’70s did reveal the need to modernize and reform the substance and emphasis of bank examination and supervision. That is now happening in all three federal banking agencies and in some state banking departments. No place is this change occurring more broadly or swiftly than in the Office of the Comptroller of the Cur rency. Those interested in comprehend ing these changes in detail should ob tain copies of the study conducted for the Comptroller by the accounting and consulting firm, Haskins & Sells, as well as the report released early this year by the General Accounting Office. Conceptually, the new approaches to examination are moving to an analysis and evaluation of individual banks in terms of the dynamic, ongoing process of producing loans and investments rather than the static snapshot of bal ance-sheet configuration and quality on some arbitrary “as-of” date. This new approach to examination demands an understanding of a bank’s complete operating system from the point at the top where policy is developed all the way through to the execution (or non execution) of that policy in the form of loans and investments. This modern approach to examina tion will give major emphasis to de velopment, communication and execu tion of fundamental policy. It will be as concerned, as is good management, with both the procedures and policies that offer realistic expectation for good and sustainable profitability. Greater at tention than ever before will be given to the adequacy of internal and external audit practices, to the effectiveness of periodic asset quality review (both loans and investments), to systematic attention to control of overhead ex pense, and to all other risk-control sys tems and programs. (Continued on p ag e 74) MID-CONTINENT BA N K ER fo r May 1 5 , 1 9 7 7 Government Credit Allocation: How Can Banks Head It Off? By W. UDDON McPETERS • President • American Bankers Association L IT T L E MORE than two years ago, when inflation was at its peak, there was a good deal of talk about government credit allocation. Although most of this talk was about how credit allocation was not a good idea, bankers knew the situation was much more serious than when there was no discussion at all. Fortunately, we were able to marshall our forces and defeat legislation in Congress that might well have led to direct allocation of credit by govern ment flat. Most of us heaved a great sigh of relief. So why bring the subject up at all? Because our experience over the past several years has shown that talk of government credit allocation usually begins during periods of inflation. Any heating up of the economy has serious implications for all bankers, particularly commercial lenders. If history is any guide, renewed inflation inevitably will bring a renewed interest in government allocation of credit. That also has serious implications for com mercial lenders. Thus, it makes sense to take time now—before talk about government credit allocation begins—to look at some issues surrounding this question. First of all, we must recognize that we already are living with credit allo cation in a wide variety of forms. The question about credit allocation is not w hether, but by w hom and for what. Every time a banker makes a decision to lend money to a factory and not a construction company, he’s allocating credit, because that money no longer is available for all other borrowers. And the sum total of all our individual de cisions determines which class of bor rowers receives how much credit. In the theoretical world of the econo mists, operations of this free market are unencumbered by any government in volvement. But in the real world of 1977, government already is involved to a great degree in credit allocation. Most of us are familiar with the more direct forms of government inter vention in credit allocation. For exam ple, the federal government regulates A S&Ls differently from banks to en courage flow of funds into housing. However, too many of us fail to recognize that we already are living with more subtle government credit allocation in the form of tax preferences and incentives. These tax incentives are supposed to do two things: affect the willingness of lenders to make money available for certain high-priority pur poses, such as housing; and affect the desire of borrowers to borrow funds to meet that purpose. That, in turn, in fluences availability of credit for other purposes not considered to have such a high priority by government policy makers. As lenders, we are aware of the im pact of government credit allocation on our own activities, but sometimes we forget the other half of the equation— the effect on borrowers and their ability to choose freely for themselves those purposes for which they want to bor row money. That’s the real threat of direct government credit allocation— the threat to individual freedoms. For the benefit of those bankers who become irate at the very mention of any form of credit allocation, I should point out that our position on this issue hasn’t always been entirely consistent. Consider, for example, some bankers’ attitudes toward loan guarantees de signed specifically to channel funds into certain high-priority areas. Or consider the tax exemption on municipal bonds —again designed to make it easier for state and city governments to obtain credit. I don’t hear many bankers arguing against these examples of government intervention in the work ings of the free market. MID-CONTINENT BA N K ER fo r May 1 5 , 1 9 7 7 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis W. L id d on M cPeters is pres., Security B ank, C orinth, M iss. H e g a v e the ta lk on w h ic h this article is b a se d a t the A B A 's 1977 N a t 'l C redit C onference. The fact that we have learned to live with some instances of indirect credit allocation should not blind us to the problems inherent in any govern ment intervention in credit markets. To my mind, these problems fall into three categories : First and most important: Does credit allocation work? Is it really possible for government to influence by fiat the flow of funds into a specific highpriority area? In some cases, the answer seems to be “no.” Consider the example of housing. First of all, government sets up a special class of financial institutions whose primary function is to lend money for housing. Then, to make sure home buyers don’t pay interest rates that are too high, government estab lishes usury ceilings. When interest rates begin to rise, the special financial institutions are locked into long-term mortgages with relatively low interest rates. That means these institutions can not afford to compete for funds on the free market. Not only that, the usury ceilings prevent the institutions from charging market rates on new mort gages. The effect is to deny housing credit to the very home buyers that government intended to help. In this situation, government’s instinct is to move to direct credit allocation. How ever, I doubt that the solution is more government intervention. Instead, it would make more sense to eliminate the original government involvement— usury ceilings— thereby making credit available to home buyers at market rates. How strange that these ceilings often wind up hurting the people they were intended to help by drying up the supply of credit. Even if government efforts to allocate credit were successful, there’s still an other question to consider: Who de cides what areas deserve credit allo cation? Again, consider the example of housing, perhaps the most uni versally agreed-on social goal. Or is it? Let’s assume that government can establish a program that will encourage all financial institutions to lend money for housing. What happens in com- 25 munities where there already is an ade quate supply of housing—but not enough money available for agricultural loans? How does a government program of credit allocation take into account the regional differences in credit needs? Equally important, how do we achieve a consensus on which areas of the economy are most deserving of special credit allocation? Is housing more deserving than urban redevelop ment? Is growth of small business more important than environmental protec tion? And where does capital formation — the key to all economic growth—fit into this scheme of social priorities? Finally, there’s the question of how credit allocation affects the borrower. As I said earlier, bankers are most conscious of the effect of government intervention on their own decisions to extent credit, but government inter vention also is intended to affect the way customers use funds they borrow. Tax incentives are a good example. The investment tax credit is designed to encourage business to channel funds into plant and equipment. So all other factors being equal, commercial bor rowers may be more inclined to seek credit to invest in capital goods than for other purposes. attractive for borrowers to borrow. They do not limit the borrower’s free dom to decide how to invest his funds —they simply set up artificial incentives to make some choices more attractive than others. However, the market has a way of getting around these artificial incentives to meet the real needs of the customer. These incentives simply will not work for long if they run counter to the real demands of the marketplace. Tax deduction for mortgage interest is a good example. The fact that I can deduct mortgage interest on my tax return may make it advantageous for me to have a mortgage. But there’s nothing that says I have to use that money to finance a house. That fact has not escaped the notice of many home owners—or bankers. Many home owners are refinancing their homes and using the extra money for other purposes— buying a boat or sending their children to college. The result is that the total volume of mortgages increases, but the funds themselves may not be going into housing. In the end, credit goes where the demand is greatest—despite the artificial incentive established by government intervention. In fact, that’s the problem with " As lenders, we are aw are of the impact of government credit allocation on our own activities, but sometimes we forget the other half of the equation— the effect on borrowers and their ability to choose freely for themselves those purposes for which they w ant to borrow m oney/1 In the same way, the accelerated depreciation allowance encourages in vestment in capital goods. If I can charge off my depreciation in five years, rather than 10, I may be more inclined to borrow money to invest in capital goods. Tax deduction for mortgage interest is designed to encourage consumers to buy their own homes, because the housing industry and individual home ownership occupy positions of high priority in our society. So, since I can write off my mortgage interest on my tax return, I am more inclined to buy a house than to rent an apartment— even when an apartment would make more sense for my individual circum stances. All these tax incentives have the effect of channeling more funds into specific areas that government con siders to have a high priority. They are supposed to work not by making it more attractive for lenders to lend for these purposes, but by making it more 26 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis government intervention. It introduces artificial rigidities into the workings of the market, and these rigidities make no allowances for changes in demand or need. Now, advocates of credit allocation are not stupid. They recognize that these incentives have failed to channel what they consider to be adequate funds into particular areas. So their natural incli nation is to intervene in the market in still another way, perhaps more di rectly. The logical outcome of this progression is flat-out controls on how lenders allocate credit: So much for housing, so much for environmental protection, so much for urban renewal. That’s bad for lenders, but it’s even worse for borowers. That’s the real argument against credit controls—They put serious re strictions on the individual borrower’s freedom of choice. Under direct govern ment credit allocation, the government —not the borrower—determines which areas deserve credit and which do not. Under legislation proposed in 1975, for example, credit would have been di rected to so-called “national priority uses,” such as housing and loans to state and local governments; whereas, loans for “excessive inventory accumu lation” and those to “foreigners” would have been discouraged as inflationary. The legislation represented a serious in fringement on the economic freedom of borrowers. The problem is compounded by the fact that while it may be theoretically possible to put controls on the way financial institutions allocate credit, it’s next to impossible to control credit allocation in m oney m arkets. Accord ingly, when large businesses cannot get the credit they seek from commercial banks, they simply move into the money market. But small businesses and consumers don’t have that option. The result is that credit controls tend to penalize consumers and small busi nesses— often the very people the con trols were meant to help. Add to this the question of how much credit allocation the market can tolerate before it begins to break down. Each instance of government regulation intro duces a distortion into the market— a distortion that makes the market less efficient. How much of our total pool of credit can we afford to set aside for allocation to specific high-priority areas before the system breaks down entirely? Is 10% enough? 20%? 30%? I believe bankers are realistic enough to recognize that government is not going to get out of the business of try ing to influence the flow of credit in our economy. But I’m enough of an optimist to hope that government lenders will begin to recognize the complexity of what they are attempt ing to do. Certainly, commercial lenders can appreciate the enormity of this task. Bankers make decisions every day that determine credit allocation in their communities. The validity of those de cisions affects not only the future of the bankers’ individual institutions, but the future of their corporate customers and indeed, the nation they serve. They know the difficulty of sorting out all the information about a potential bor rower—statistics on the condition of the corporation, facts about the purpose of the loan, projections on future markets for products and services. In fact, sometimes they wind up knowing more about their corporate customer than the corporation knew when it be gan seeking a loan. Perhaps better than anyone else, bankers can appreciate the difficult task government sets for itself in seek(Continued on p ag e 43) MID-CONTINENT BA N K ER fo r May 1 5 , 1 9 7 7 Regulatory and Competitive Pressures: BENEFITS VERSUS COSTS NUM BER of bank regulatory changes in recent years have been aimed at increasing the banking system’s ability to adapt to changing financial market conditions. In addition, the rapid growth and spread of bank holding companies have altered sub stantially the banking structure in the U. S. These changes have brought both benefits and some less-desirable con sequences to the banking industry. It’s useful, from time to time, to step back and weigh the benefits against the costs of these regulatory and competitive changes and to consider what further steps might be appropriate to consoli date the gains or to alleviate some of the adverse effects of what already has been done. Regulatory Changes. Among recent regulatory changes that are particularly relevant in this context are (1) elimina tion of all rate ceilings on large de nomination CDs in 1970 (on matur ities under 180 days) and in 1973 (on maturities over 180 days), (2 ) the sub stantial increase in 1973 in rate ceil ings on small consumer CDs with ma turities in excess of 2/2 years, (3 ) reg ulatory and operational changes, such as NOW-account and telephone-trans fer powers, that are permitting use of time and savings deposits for transac tions balances, (4) reduction in re serve requirements on Eurodollar bor rowings from foreign banks from 20% in 1971 to 8% in 1973 and to 4% in 1975 and (5 ) reduction to 1% in 1975 in reserve requirements on time de posits with maturities of at least four years. In addition, the Fed and other reg ulators have taken a tolerant hands-off attitude toward the fed funds market, in effect permitting unlimited pur chases and sales of fed funds without collateral (except as limited by Section 23A ), without rate ceilings and with out reserve requirements. In the competitive area, the dramatic extension of holding companies to the point where over 65% of all banking assets are now in banks affiliated with HCs has served to increase competitive pressures in a number of banking mar kets. In addition, the success of non bank institutions to enter certain tra ditional banking markets has increased A By PHILIP E. COLDWELL Member, Board of Governors Federal Reserve System competitive pressures on some banks. For example, money-market mutual funds now compete for short-term sav ings and NOW accounts for what es sentially are demand deposits. P ublic Benefits. Significant public benefits have resulted from these reg ulatory and competitive changes. The complete rate freedom on large CDs has made it possible for banks to retain deposits that otherwise could have been drawn out of the banking system by high interest rates. Because of the importance of bank loans as financing for small and medi um-size businesses, which do not have access to commercial paper and pri vate-placement markets, such con tinued funding has been of some im portance in avoiding a disproportionate impact of tight money on such bank loan customers. The significance of large CDs as a source of bank loan funds can be seen from figures showing the contribution made by large CDs to the increase in bank loans in 1974, when interest rates hit their peak. The total increase in bank loans during 1974 was $52 bil lion, and the $27-billion increase in large CDs outstanding equaled over 50% of these funds. In 1973, a $21billion increase in large CDs reached 29% of the increase in outstanding loans in that year. However, 1974 bank loans provided 38% of the net increase in private domestic credit, down sub stantially from the average of 45% in the preceding two years. If banks had not been free to raise MID-CONTINENT BA N K ER fo r May 1 5 , 1 9 7 7 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis This article is b a se d on re m a rk s g iv e n b y M r. C o ld w e ll a t the annual m eeting of the Seven th District of the T e x a s B a n k e rs A s sociation, held in Fort W o rth recently. open market funds through large CDs, the role of banks as lenders would have been reduced further, perhaps disad vantaging bank customers who have no realistic alternative for credit. Freedom to engage in federal funds transactions also has been important as the funds market gives banks an extra flexibility to raise liabilities so that they can fund loans when demand is high. Furthermore, enabling banks to derive earnings from overnight placement of funds makes possible higher bank earnings, lower interest rates on loans or a combination of the two. There also are potentially important public benefits in subjecting banks to the discipline of the competitive mar ketplace. Interest-rate c o m p e titio n among banks as well as competition from new institutions or those with new and vigorous management help to achieve a better combination of earn ings and service to depositors and com petitive interest rates for loan cus tomers. Thus, recent regulatory and competitive changes have helped in crease efficiency in financial markets. Disturbing Trends. However, a num ber of disturbing trends also have been observed during recent years, and one might wonder if the impacts of some of the recent regulatory actions may have permitted bank actions that created these problems. Among these disturbing trends are the dramatic increase in bank reliance on potentially unstable purchasedmoney liabilities, increased number of banks experiencing some degree of fi nancial distress and erosion of capital ratios, thus reducing the banking sys tem’s ability to weather serious adverse shocks. Heavy reliance on purchased money has been most striking among the larg est banks. At the end of 1974, the aver age borrowing ratio of large New York banks, the ratio-to-assets of their large negotiable CDs, fed funds purchased and obligations to foreign branches averaged 36%, contrasted with 26% for the large weekly reporting banks out side New York and a much lower ratio for smaller banks. This borrowing ratio of the large New York banks had declined modestly 27 /7/n the competitive area, the dramatic extension of holding companies to the point where over 65% of all banking assets are now in banks affiliated with HCs has served to increase competi tive pressures in a number of banking markets to 34% at the end of 1976, but even this level was much higher than the 22% average borrowing ratio that pre vailed among these banks at the end of 1971. As these figures are averages, some individual banks clearly have had even higher borrowing ratios. The financial distress of portions of the banking industry has been evident to everyone. While average bank profit figures generally rose through 1974, held steady in 1975 and rose again in 1976, net loan losses were well above normal in these years. Despite the gen erally good earnings, the percentage of banks reporting no net income before taxes grew from less than 3% in 1970 to 7.9% in 1975 and over 8% (1,200 banks) in the first six months of 1976. This trend has existed among large as well as small banks. Bank failures, the extreme form of financial distress, in creased in 1975 and 1976, but were still insignificant in relation to the en tire banking system. Potential exposure of the banking in dustry to adverse shocks shows up in two ways. First, increased dependence on purchased-money liabilities clearly holds the potential for severe cash-flow problems for a bank that for some rea son becomes a concern to the money market. Also, the capital base of the banking system, its equity capital, re serves and subordinated notes and debentures, has declined steadily for a number of years as a ratio to total as sets, falling below 7% in 1974 on the average for all banks having over $100 million in deposits and close to 6% for the largest banks. Although capital ratios of large banks have improved somewhat since then, the gain has been modest. To some degree, the banking indus try is exposed to the financing of one bank by others. Thus, a bank with a large purchased-money position often relies on the continued availability of fed funds from other banks. Such an exposure may suffer both from the funding needs of other banks and from their perception of the soundness of the heavily committed bank. The competitive force for expansion into nonbank fields probably led some HC managements into unwise acquisi tions. Increased competition resulting from this expansion may have been a factor in the current problems of some 28 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis bank HCs and may have contributed to a few failures. Regulators’ insistence on increased competition may have ex posed some banking units to excessive pressure and thus encouraged competi tive forces to dominate banker re sponses. W as Regulatory C hange Responsi ble? The crucial questions raised by these problems are what role regula tory liberalization may have played in generating these problems and where we should go from here. There’s little doubt that removal of rate ceilings on large CDs and the liberal attitude toward regulation of fed funds have been of central im portance in enabling banks that are so inclined to incur substantial pur chased-money obligations. They could not have done so under more restrictive regulatory conditions. It is not possible, however, to connect this increase in purchased-money obligations in any simple way with financial distress in the banking system. While it may have played a role in isolated cases, heavy use of purchased money has not been associated in general with falling or low profits. As a group, large banks have had the highest borrowing ratios over the past three years. Nevertheless, the averages hide sub stantial diversity among banks. As noted earlier, the number of banks re porting no income has been rising in all size classes, and the predominant cause of losses for banks has been poor loans. Did the high cost of purchased money force some banks into making unwise loans in an attempt to maintain a good spread of revenues over costs? Did the freedom to buy purchased money and a competitive desire to maintain or expand market share tempt them to make unwise loans they would otherwise have turned down? If banks had been restricted by regulation from dealing so heavily in purchased funds, would fewer bad loans have been made? Fewer loans of all kinds, bad or good, would have been made under more strict regulatory control, because bank-asset growth would have been more strictly limited. And it may well be that poor risks would have been more effectively screened out, with the earnings of the weaker banks holding up better than they did. But would that have been a desirable outcome, to restrict more tightly the growth of bank lending during years of recession? Capital A dequacy. Again, it comes down to a matter of weighing benefits and costs. Risk taking is essential if the banking system is to fulfill its role. Con sequently, some banks inevitably will suffer losses. The ability of banks to absorb heavier than normal losses one year and move on depends ultimately on earnings and their capital positions. And here lies one of my concerns—do present laws and regulations deal ade quately with the issue of bank capital? As I mentioned before, bank capital as a percent of assets has been declin ing steadily for years, except for a modest increase in 1976. Furthermore, I would not want to argue that the pe riod of pressure on bank profit margins and losses for individual banks has ended. As the economy heads up onto higher ground, competitive pressures in banking will intensify. Deregulation is in the air, and for banks that might mean full-scale competition from thrift institutions, interest on demand de posits or at least on NOW accounts and possibly even a federal branching amendment to the McFadden Act. If you add to that the E F T revolu tion—which under certain configura tions and in certain impacts may work to the advantage of thrift institutions and against their commercial bank competitors—you have the ingredients of heavy pressure on bank profits in the next decade. Nobody knows how much capital is “adequate,” in an absolute sense. But I do know that more capital is more adequate than less capital, and I also know that it is not just the stockholders and investors of a bank who suffer if that bank gets into severe difficulties because of inadequate capital. One of the obvious consequences of a regula tory framework that places no limits on purchased-money liabilities is that banks can leverage capital, subject only to market restraints. It enables them to pile large quantities of potentially volatile liabilities and loan assets on top of a fixed-capital base. The possible consequences trouble me. What can be done to encourage banks to build up their capital base, especially their equity base? Part of the problem lies in the structure of the corporation income tax, which has favored debt capital at the expense of equity for nonfinancial as well as fi nancial corporations. This distortion usually is mild when there is no infla tion, but it becomes far more severe when inflation drives up interest rates on debt and the tax system makes all that interest deductible. Whatever may be the difficulties with making divi dends at least partially deductible, or (C ontinued on p ag e 68) MID-CONTINENT BA N K ER fo r May 1 5 , 1 9 7 7 E D IT O R ’S N O T E : T he opinions ex p ressed in this article are those o f the author an d do not necessarily represent th e view s o f the C om ptroller o f the Currency. AST SUM M ER, the Comptroller published a proposed regulation governing disposition of income de rived from the sale of credit life, health and accident insurance. The proposal was the culmination of a number of events. The bank regulatory agencies have been aware for some time that officers, directors and controlling stockholders of some banks divert to their own pockets income generated by credit life insurance sales. W e have tried to dis courage this practice because it’s alien to the orderly and systematic account ing of funds for which banks are well known and which they require of oth ers. Furthermore, the practice is utter ly inconsistent with the generally held notion that profits earned from activi ties carried on in a bank should re dound to the benefit of the bank and all its stockholders, not to insiders’ de mand-deposit accounts. To determine the breadth of the practice, national bank examiners in quired into the manner in which credit life insurance income is handled dur ing all bank examinations between No vember, 1975, and May, 1976. A sur vey of 2,900 national banks showed that the practice of paying insurance income directly to insiders is rare in the East, with the exception of Tennessee, and on the West Coast. In the Mid west, however, the practice is not un common, particularly among smaller banks. In the meantime, we had written letters to a number of banks through out the country requesting that income from credit life insurance sales be placed in the banks’ income accounts. Where state insurance laws presented obstacles to a licensed agent’s turning over or assigning his commissions to the bank, or where local counsel dis puted the Comptroller’s interpretation of federal law, the burden was placed on the bank to find a method of mak ing credit life coverage available that would not require bank personnel to L By FORD BARRETT Assistant Chief Counsel Comptroller of the Currency Washington, D. C. retain the income for themselves. Sev eral methods were suggested, including the outstanding-loan-balance method, which provides credit life coverage to borrowers without charge. In effect, we were telling these banks that we didn’t care how they sold credit life insur ance, but they couldn’t select a method that would confer personal benefits on insiders. These letters achieved the desired result in a number of instances. How ever, in April, 1976, when we asked four banks in Texas controlled by a sin gle family to stop paying the credit life income to insiders, we were promptly met with a lawsuit alleging that a na tional bank doing business in a town of more than 5,000 persons cannot— under 12 U.S.C. 92—legally receive insurance commissions. Subsequently, the Texas State Board of Insurance was made a party, thereby raising as an issue the applicability of Texas in surance laws to this question. While the battle was heating up in Texas, a similar controversy was under way in a state court in Alabama, where a minority shareholder had sued direc tors of a national bank for diverting to themselves all the income derived from the sale of credit life insurance to bank customers. At one point, counsel for the bank asked the Comptroller’s Office for assistance. Appalled by the factual set ting of the case, we declined to inter vene on the bank’s behalf, but did ac- F O R D BA R RETT joined the C o m p tro lle r's Office in 1 9 7 0 a s a staff a t to rn e y a n d w a s n a m e d a ssista n t chief coun sel in 1976. H e is c o -a u tho r w ith C. W e st b r o o k M u r p h y of "L e g a l P rob le m s of Applying Electronic Fu n d s T echn iq ue s to Retail B a n k in g , " 17 Jurim etrics J o u rn a l 111 (fall, 1976). M r. B a r rett h o ld s a B.A. d e g re e from Trinity C o l lege, H artfo rd , Conn., a n d a n LL.B. d e g re e fro m the U n ive rsity o f V irg in ia L a w School. MID-CONTINENT BA N K ER fo r May 1 5 , 1 9 7 7 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis cept an invitation from the court to file an am icus curiae brief. In the brief, we took the position that 12 U.S.C. 92 d oes not prevent a national bank in a town of more than 5,000 persons from acting as agent for the sale of credit life insurance or receiving commissions therefrom. Even if the bank were so precluded, the directors had violated their fiduciary obligations under the common law and under 12 U.S.C. 73 by failing to seek out alternative ar rangements through which credit life insurance could be sold without the directors’ incurring a personal benefit. After all briefs had been submitted, the court indicated informally that it intended to hold the directors liable, but the case was ultimately settled. Under the court-approved settlement, income from credit life insurance sales to bank customers would be accumu lated in a separate fund and distribut ed to stockholders on a pro rata basis at least annually. A separate provision allows the directors to pay the income to the bank if such a course of action is deemed desirable. In recent years, the Comptroller’s Office has not asked a court in an am icus curiae brief to hold directors personally liable for misuse of income generated on bank premises. The deci sion to do so in this instance was based partially on the belief that the best way to eliminate this form of self-dealing is to obtain a court decision holding directors personally liable. Such a de cision would help change industry practice faster than regulations pro posed and promulgated in Washington. Accordingly, we were disappointed to see the case settled before a final de termination of the merits in an appel late court. H ow ever, w e will continue to par ticipate in suits brought by minority shareholders on this issue in the h op e that directors ivill com e to understand that their duty is to prom ote and ad vance th e interests o f their bank, not to profit personally at th e expense o f other shareholders from its activities. The Alabama and Texas cases, com bined with an increasing number of lawsuits involving misuse of insurance income by S&L directors, convinced us that a formal regulation was required 29 to end this practice. The old policy of jawboning bankers into putting the credit life income in the bank’s income accounts had not met with great suc cess, nor had it been evenly applied throughout the country. An alternative policy of requiring insiders to compensate the bank for use of its premises also was unsatisfactory because the administrative expense of selling credit life insurance is miniscule in relation to the huge amounts of in come generated. While this policy re sulted in some measure of reimburse ment to the bank for its overhead ex penses, it allowed the balance of the income to bypass the bank’s books in favor of insiders. Such a practice is not conducive to continued public faith in a bank or to a harmonious relationship among stockholders. In light of these considerations, the Comptroller proposed a new regulation on July 20, 1976, to halt the practice. Slightly over 200 comments were re ceived, and a considerable amount of time has been spent in analyzing them. One issue raised by the comments relates to state insurance laws that pur portedly prohibit an unlicensed entity like a bank from receiving credit life insurance commissions. While it’s rarely stated explicitly, many comments ap pear to suggest that if the bank cannot legally receive the income under state law, the insiders can take it for them selves. Whether this result automatical ly follows is a serious question. The question of applicability of state insurance laws raises a host of difficult issues. Indeed, their complexity is far out of proportion to the small number of states where local insurance laws can be interpreted as prohibiting a bank from receiving credit life insur ance income. But since those issues may have to be faced in several states, notably Texas and Oklahoma, they will be mentioned briefly. The first issue is whether state stat utes cited by bankers to support their argument that the bank cannot receive the income are properly interpreted as prohibiting a bank employee holding an agent’s license from assigning his credit life commissions to his employer (the bank). Research indicates that statutes prohibiting an agent from splitting his income with a non-licensed person or entity were designed to ac complish other objectives, not to pre vent a bank employee from turning over his commissions to his employer. Secondly, it would appear that by li censing a bank employee, the state has, in reality, licensed the employee’s prin cipal, the bank, and there is no issue of income being passed between li censed and unlicensed persons. Pre sumably, if state insurance laws really intended to preclude banks from earn ing credit life insurance income, the state would refuse to license not only banks, but also their employees. That states continue to license bank employ ees is an acknowledgement that banks can receive income generated by their employees. If the practice were the op posite and the state refused to license both the bank and anyone working for it, the Comptroller might have to con cede that state insurance laws in that state were truly designed to prohibit banks from receiving insurance income. In short, it’s utterly illogical to sug gest that the state may validly license a bank employee, but prohibit that employee from turning over the income to his employer, the bank. Employees generally bear a principal-agent rela tionship to their employer, and if the employee can receive income from an activity conducted on the employer’s premises, the employer also can receive Independents Protest Comptroller's Proposal The Independent Bankers Association of America, at its 1977 convention, adopted a resolution to resist any attempt to prevent employees, officers and directors or principal stockholders of national banks from personally receiving income from credit life and disability insurance sales. In its protest against the Comptroller’s proposed ban on such income, the IBAA asserts that this arbitrary proposal would take away property rights of individuals in violation of constitutional due process, would pre empt the exclusive rights of the states to regulate insurance and would create liability of individuals for income taxes on commissions paid to them, but forced by regulation to be transferred to their banks. According to the Independents, private agencies on bank premises have existed for decades, and commission income is critical in negotiating the sale of a bank from one independent owner to another. The IBAA also says that there already are adequate remedial laws to correct abuses, if any occur, and that no regulation is necessary. In addition, according to the IBAA, no law prohibits a private agency on bank premises so long as there is disclosure of its operations to directors and shareholders, and the bank is reimbursed for allocable overhead expenses of the agency using bank facilities and personnel. 30 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis it. This is the general practice in American business, where income earned by an employee is regarded as the employer’s income. So it is in na tional banks. Employees of a national bank are part of the bank, and income earned by them on bank premises, using bank customers and bank good will, is the bank’s property. Employees of a national bank are not in business for themselves. Assuming, however, that state insur ance laws are properly interpreted as prohibiting a bank employee from turn ing over his credit life insurance com missions to the bank, the next difficult question is whether such laws are ap plicable to federal instrumentalities like national banks. Historically, the range of state laws binding on national banks has been narrow. An important tenet underlying the National Bank Act, as explained in a number of deci sions by the U. S. Supreme Court, is that the states cannot be permitted to control too closely the affairs of an en tity chartered, regulated and responsi ble solely to the federal government. Obviously, this proposition cannot be carried too far, for no one could argue seriously that national banks are not subject to the Uniform Commercial Code as embodied in the codes of 49 states. But the fact that the national banking system is now a permanent fixture in our economic life does not alter the continued vitality of the prop osition that state control over a nation al bank’s operations cannot be assumed lightly. In the last case to come before it in volving applicability of state laws (oth er than tax laws) to national banks, the Supreme Court struck down a New York statute limiting a national bank’s power to advertise for savings ac counts. These considerations lead me to believe that even if state laws are correctly interpreted as barring a bank employee from turning over credit life insurance commissions to his bank, a court may find this to be an intolerable interference in the affairs of a federal instrumentality. Finally, let us assume (1) that state insurance laws are correctly interpreted as barring bank employees from turn ing over their credit life insurance com missions to their employers and (2) that such laws are applicable to nation al banks. The question then becomes whether bankers are justified in retain ing the income for themselves. It’s difficult to rationalize a banker’s receiving this income under any cir cumstances and especially where there are alternative methods allowing the bank to provide credit life coverage without the necessity of paying com mission income to individual officers MID-CONTINENT BA N K ER fo r May 1 5 , 1 9 7 7 all Jim Call Jim Dixon, Vice President and In vestment Officer at Fourth National, and you have called upon 18 years of experience in the investment areas of banking. Jim is in charge not only of Fourth National's own in vestment portfolio, but he is also here to help you, our cor respondent bankers, with your's. Whether it be ad o rn a rticular Investments and I , or overall egy on invest^ffiérft management. B n is the man to ¡1* As past Presiof the Okla homa Society of Bjnancial Analysts, B e is a recognized leader in the field. ■■I National Bank Tulsa,O k la h o iili MID-CONTINENT BA N K ER fo r May 1 5 , 1 9 7 7 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 31 and directors. Some banks and many credit unions now use these methods, thereby avoiding awkward questions of licensing and commission splitting. If these methods are available, common law principles and 12 U.S.C. 73 would require directors to use them in lieu of other approaches that benefit them selves personally. Such a philosophy seems almost mandatory for directors of financial institutions, whose exis tence depends almost solely on public trust. The ability of bankers to devise al ternative arrangements has been illus- credit life income go to the bank in fa vor of a general prohibition against its retention by insiders. While some have argued that the bank can’t legally re ceive this income, no one has suggested that the Comptroller cannot legally prohibit insiders from keeping it for themselves. This would seem to be a clearly valid exercise of the Comp troller’s authority under the Financial Institutions Supervisory Act to halt “unsafe and unsound banking prac tices.” The proposed credit life insurance regulation has spawned a number of of a bank or a chain of banks where the purchasers must rely on diverting to themselves credit life insurance in come for the purpose of retiring their personal debts. If acquisition debt must be serviced with bank income at all, it is serviced properly only with divi dends duly declared by the directors and payable to all stockholders. • • The speech on which this article is based was given by Mr. Barrett at a banking law seminar sponsored by the Alabama Bar Institute for Continuing Legal Education. S&L/Supermarket Transactions Are Initiated in Dayton Area " The question of applicability of state insurance laws raises a host of difficult issues. Indeed, their complexity is far out of propor tion to the small number of states where local insurance laws can be interpreted as prohibiting a bank from receiving credit life in surance income trated in several instances following publication of the Comptroller’s pro posed regulation. An Oklahoma bank has organized a business trust, which, in turn, operates a licensed insurance agency. The agency remits its income to the trust, which remits to its benefi ciary, the bank. Since the Oklahoma attorney general previously had ap proved ownership of an insurance agency by a business trust, there seems to be no problem with this mode of operation. In Montana, a group of 11 banks under common control have de vised a plan, approved by the Comp troller’s Office, under which the credit life insurance income generated at each bank will continue to be paid to a sep arate insurance agency with the share allocable to each bank’s minority share holders retained in trust and distribut ed by means of periodic payments. These imaginative proposals show the extraordinary ability of American private enterprise to find a way out of a difficult situation created by antiquat ed, and perhaps misunderstood, state insurance laws, while at the same time preserving the interests of all stock holders. It may be desirable to obtain a judi cial solution to some of the issues raised above. On the other hand, litiga tion is time consuming and expensive, and some thought is being given to changing the regulation so as to avoid prolonged debate in the courts and yet achieve the regulation’s overall pur pose, which is to prevent insiders from profiting personally on activities carried out on bank premises. One such change would be to drop our insistence that 32 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis related questions. In a recent case, the issue was whether a national bank can designate its controlling stockholder as exclusive agent for the purchase of various kinds of insurance coverage, such as fire insurance, directors’ and officers’ liability insurance, blanket bond coverage, etc. In addition, the controlling stockholder wanted to be designated as exclusive agent for the sale of all credit life insurance to bank loan customers. To add icing to the cake, the controlling stockholder ap parently intended to have the bank’s credit life insurance underwritten by an insurance company in which he and his family had a dominant interest. In this way, the controlling stockholder would be able to profit personally from all the bank’s insurance dealings and, as far as the credit life insurance is concerned, would be able to benefit both on the retailing and underwriting ends. The abusive self-dealing inherent in this proposal was so obvious that no one could have been surprised when the Comptroller’s Office threw cold wa ter on the idea. Moreover, the proposal raised other problems. It evidently was predicated on the controlling stock holder’s desire to use the insurance in come to repay his bank stock loan. Whether individuals or small groups should be allowed to purchase control of a financial institution or a series of financial institutions and rely on in come other than dividends to service their acquisition debt is a serious ques tion going to the safety and soundness of a bank’s operation. The Comptrol ler’s Office cannot condone acquisition DAYTON, O.— S&Ls in this area have begun offering a new “Cash Plus” service to 185,000 customers, enabling them to perform financial transactions at local supermarkets. Nine S&Ls have formed an organi zation called Savings & Loan Auto mated Teller E x c h a n g e , Inc., or SLATE, to handle the new service. The latter uses NCR 279 financial terminals, which are installed at super market service counters and linked to computers at NCR’s Dayton Data Center. When S&L customers want to cash a check or make a savings deposit or withdrawal, they present their “Cash Plus/ Prestige” card at the service counter. Details of the financial trans action are communicated to the Data Center computer, which selects the designated S&L and forwards pertinent data to the association’s computer to complete the negotiation. Plans also have been made to extend the service to two other Ohio areas— Columbus and Cincinnati—this year. Su p e rm a rke t custom er tra n sa c ts b u sin e ss w ith S&L b y u sin g " C a s h P lu s / P r e s t ig e " card, w h ich g a in s access to system . S a le s p e rso n then enters tra n sa c tion into N C R 2 7 9 fin a n cia l term i nal. T ra n sa c tio n 's d e ta ils a re tran sm itte d o v e r tele p ho ne lines to com p uter at N C R D a ta Center, w h ich , in turn, tra n sm its d a ta to p ro p e r S&L. MID-CONTINENT BA N K ER fo r May 1 5 , 1 9 7 7 THE LOOK OF HIGH FINANCE US traditional or contemporary, but it must have that feeling, that certain aura, that says the person who occupies this space is a professional. We understand that at Arrow Business Services. Our Design Department specializes in that look. We cater to it with 16,000 square feet of custom showroom. Furniture. Decor pieces and accessories. People and paper flow systems. Even supplies. And all of it is in active inventory in our 25,000 square feet of warehouse behind the showroom. We also understand some thing else at Arrow... even the look of 54RROI/M high finance should be supplied at a BUSINESS SERVICES INC. reasonable cost. Call us, and let us take an a ffiliate o f M em phis Bank & Trust 3 0 5 0 M iIIbranch • M em phis, Tennessee 38116 a look at your needs. MID-CONTINENT BA N K ER fo r May 1 5 , 1 9 7 7 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 33 D IE R K S Q U IN L A N DARGAN Y E LT O N SM ALLEY H O L L EY B A N IC K Convention 'First-Timers' These new faces will be rep resenting city-correspond ent banks at state conventions this year. Mississippi Convention • David A. Dierks is a vice presi dent at First National, St. Louis, which he joined in 1969 as a trainee. He joined the regional banking division in 1971 and was elected vice president last year. • Joseph Quinlan is an assistant vice president in the correspondent bank department at Bank of New Orleans. • R. L. Holley is a correspondent bank officer at Memphis Bank. He has been at the bank for three and a half years and previously worked in the branch bank system. • Walter T. (Tom) Smalley Jr. joined Memphis Bank four years ago in the dealer finance department. He was named correspondent bank officer last year. • Adona Yelton is an account officer at Citibank, New York City. She is responsible for banks and HCs in the states of Mississippi, Alabama, Louisi ana and has back-up responsibilities in Texas. O 'B R IE N 34 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis HOHMAN Tennessee Convention Arkansas Convention o Dean V. Banick is a vice president in the banking department at Northern Trust, Chicago. He joined the bank in 1962 and was named vice president in 1973. • John Dargan is a member of the national correspondent d iv is io n at American National, Chattanooga. He joined the bank in 1973. • Frederick M. O’Brien is a loan officer at First National, Chicago. He joined the bank in 1973 and handles credit and correspondent services in several eastern and southeastern states. • Reggie Holley joined Memphis Bank in 1973 and was elected a cor respondent bank officer last year. He has worked in the branch bank system. • Walter T. (Tom) Smalley Jr. joined Memphis Bank in 1973 and was made a correspondent bank officer last year. • David A. Dierks is a vice presi dent at First National, St. Louis. He joined the bank in 1969 following ser vice with Ralston Purina Co., Pitts burgh. He joined the regional banking division in 1971. • Charles G. Hohman is a commer cial banking officer at Harris Bank, Chi cago. He joined the bank in 1973 and is assigned to states in the Southeast. • Randall D. Harper joined Union National, Little Rock, in April. He works with correspondent banks throughout Arkansas. • Reggie Holley was elected a cor respondent bank officer at Memphis Bank in 1976. During his 42 months with the bank he has worked in the branch bank system. • Walter T. (Tom) Smalley Jr. has been with Memphis Bank for four years and was assigned to the dealer finance department before moving into the branch banking area, from which he went to the correspondent depart ment. • Donald E . Lewis is an account of ficer at Citibank, New York City, and is responsible for correspondent work in Oklahoma, Arkansas and east Texas. He joined the bank three years ago. H ARPER L EW IS Illinois Convention • Daniel W. Jasper is an assistant vice president at Mercantile Trust, St. Louis. He heads Division A of the Cen tral Group, which covers Illinois, In diana and Kentucky. • Kay E . Schlueter is a correspon dent banking officer at National Boule- JA SPER SCH LEU T ER MID-CONTINENT BA N K ER fo r May 1 5 , 1 9 7 7 L a M A N T IA BECK vard Bank, Chicago. She joined the bank in 1969 and received RMA’s achievement award certificate for ob taining the highest grade in analyzing financial statements in 1975. • Ted Beck joined Central National, Chicago, recently as credit analyst trainee. He was formerly with United Bank of Westgate, Madison, Wis. • . Charles R. Kruger joined Central National, Chicago, as a commercial loan officer trainee last November. He was formerly with the Kansas City Fed as a senior analyst. • Michael A. LaMantia is an assist ant cashier in the correspondent bank ing division at Central National, Chi cago. He joined the bank in 1974 and was formerly with Harris Trust, Chi cago. New Mexico Convention • John V. N. McClure is a commer cial banking officer at Northern Trust, Chicago. He joined the bank in 1973 and is assigned to the banking depart ment. • Emily A. Schroeder is an official assistant at Citibank, New York City. She handles correspondent relation ships in New Mexico, Dallas and east/ west Texas, with backup responsibility in Oklahoma. Indiana Convention • William S. Trukenbrod is a vice president in the banking department at Northern Trust, Chicago. He joined the M A T H IA S bank in 1962 and was named a vice president in 1972. He took his graduate work at the University of Oslo in Nor way. • Daniel W . Jasper heads Division A of the Central Group at Mercantile Trust, St. Louis. He joined the bank in 1969, was named a correspondent banking officer in 1971 and assistant vice president in 1974. • Robert J. Mathias joined Mercan tile Trust, St. Louis, in June, 1974. He joined the Central Group, Division A, in 1975, and was named a banking of ficer last December. • Stephen R. Green joined Mercan tile Trust, St. Louis, in 1975 and was named a banking officer in Division A of the Central Group a year ago. • David D. York is a calling officer for First National, Louisville. He joined the bank in 1969 and is a senior bank ing officer. He is a former branch man ager. • Jerry L. Skidmore is an assistant vice president at Citizens Fidelity, Louisville. He joined the bank in 1967 and the correspondent department in October, 1976. • Richard O. Ristine Jr. is a munici pal bond sales rep at Harris Bank, Chi cago. He joined the bank last year and is a former examiner with the Chicago Fed. • Edmond Kennedy joined the in vestment department at Harris Bank, Chicago, last June. He is a registered rep of the New York Stock Exchange and the National Association of Se curity Dealers. G REEN MID-CONTINENT BA N K ER fo r May 1 5 , 1 9 7 7 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis M cCLURE YORK SCH RO EDER TRUKENBROD Futuristic Look at Banking Highlights BMA Meeting A “futuristic” look at banking will be the focus of a panel of bank market ing authorities during the Bank Mar keting Association’s 62nd annual con vention October 30-November 2 at the Hilton Hawaiian Village, Honolulu. According to the BMA, more than 2,000 bank marketing professionals from around the world are expected to be on hand for the event, which has the theme, “Managing Marketing for Profits.” Spotlighted speakers at the conven tion will be Carter H. Golembe, chair man and CEO, Golembe Associates, Inc., Washington, D. C., and John E. O’Toole, president, Foote Cone & Belding, New York City. Sessions during the event will cover topics such as “Our Changing Com petitive Environment—Who Will Sur vive?”; “What to Know Before You Advertise”; and “E F T S — Where Are W e Going From Here?” Ten workshops will examine “Plastic Cards: “A ShortTerm View, a Long-Range Perspec tive,” “Customer Needs and Wants— Your Key to Effective Marketing,” and more, while 11 rap sessions will cover a number of “hot” topics. For more information, write Con vention Registrar, Bank Marketing As sociation, 309 West Washington Street, Chicago, IL 60606. R IS T IN E KENNEDY 35 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Here’s a nice, new addition to your bank operation. The new First National Bank building When a new building gives correspondent bankers like Bob Rook and Larry Reed the additional space and equipment to work more effectively for you, it can be a plus to your bank operation. And the new First National Bank building does. Drop by and see our new building on your next visit to Amarillo. We’ll be moving in May 16th, and hold our dedication and open house on Sunday, May 22nd. If you can’t make it our way, give Bob or Larry a call at their new number. They’ll be glad to tell you how an 88-yearold bank, in a brand new building, could make a nice, new addition to your bank operation. The F IR S T n a tio n a l B a n k oT R m a n illo P.O.Box 1331 Amarillo, Texas 79180 NEW (806) 378-1400 after May 16th. MID-CONTINENT BA N K ER fo r May 1 5 , 1 9 7 7 New Mexico Convention President Santa Fe, June 9-11 St. Francis Auditorium PROGRAM N IC K S W . R. " B o b " N icks, N M B A pres., entered b a n k in g in 1941 at Fort W o rth N a t'l, then w e n t to C itizen s N a t'l, Lubbock, Tex., in 1 9 4 9 after a tte n d in g T e x a s Tech U nive rsity. In 1962, he joined C itizen s State, Sp rin ge r, w h e re he n o w is pres. M r. N ic k s is a registered lo b b y ist fo r the N M B A . President-Elect FIRST SESSION, 10 a.m ., June 10 Call to Order—W. R. NICKS, president, New Mexico Bankers As sociation, and president, Citizens State, Springer. National Anthem— MRS. B E TSY ALFORD, Santa Fe. Invocation—PASTOR PAUL R. STONE, director, Rocky Mountain Counseling and Development, Santa Fe. Address of Welcome— SAM PICK, mayor of Santa Fe. Response— CHARLES A. JOPLIN, president-elect, New Mexico Bank ers Association, and president, Security National, Roswell. Address—JER R Y APODACA, governor of New Mexico, Santa Fe. Address— R O BERT E. BARNETT, chairman, FD IC , Washington, D. C. SECOND SESSION, 9 a.m ., June 11 J O P L IN C h a rle s A . Joplin, N M B A pres.-elect, joined First N a t'l, Lubbock, Tex., in 1955. In 1957, he joined R ep u b lic N a t'l, D a lla s, a n d atte nd e d la w sch ool at night. A y e a r after g r a d u a t in g , he returned to L u b b o c k in 1963 a s v.p.. C itizen s N a t'l. H e then w o rk e d fo r t w o other b a n k s b e fore join in g Security N a t'l, R osw ell, in A p ril, 1973. H e m o v e d u p to pres, there the fo llo w in g A u g u st. Treasurer PETTY R a lp h F. Petty Jr., N M B A treas., w e n t into b a n k in g in 1 9 7 0 at Security B an k, R uido so . He joined B a n k o f S a n ta Fe in 19 7 2 a s v.p. a n d m o v e d up to e.v.p. before b e in g n a m e d to h is p resent p ost o f pres. M r. Petty serve d t w o term s (1 9 6 9 a n d 1 971) in the N e w M e x ic o H o u se o f R e p resen tatives a n d m a n a g e d the G a m b le Store in R u id o so from 19 5 9 to 1969. MID-CONTINENT BA N K ER fo r May 1 5 , 1 9 7 7 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Call to Order—W . R. NICKS. American Bankers Association Meeting—CHARLES K. JOHNSON, ABA state vice president, New Mexico member, ABA Governing Council, and president, First National, Artesia. Election of New Mexico delegates to ABA convention and member of Governing Council. Report of the Executive Vice President— DENTON R. HUDGEONS. Recognition of 25- and 50-Year Club Members—W . R. NICKS. Address—J. R EX DU W E, chairman, ARA Governing Council, and president and chairman, Farmers State, Lucas, Kan. Report of the Audit Committee— ROY E. H U DD LE JR., committee chairman and vice president and cashier, First National of Rio Arriba, Española. Report of the Resolutions Committee— G. W ILBU R JON ES, com mittee chairman and president, First National, Tucumcari. President’s Annual Report—W. R. NICKS. Report of the Nominating Committee—WAYNE STEW ART, com mittee chairman and president, First National, Alamogordo. Election of Officers. Presentation of Past President’s Pin and Certificate. Remarks by New President. Selection of 1979 Convention City. Announcements. Adjournment. 37 New Mexico Bankers Convention Speakers DU W E K IN A R D BARNETT APODACA ODEN J. R e x D u w e , im m e d iate p a st A B A pres, a n d current ch.r A B A G o v e rn in g Council, w ill sp e a k at the final g e n e ra l co n ve n tion se ssio n Ju ne 11. M r. D u w e is pres, a n d ch.( F arm e rs State, Lucas, Kan. J. Sp en cer K in a rd , Sa lt Lake City, U tah, ra d io a n d TV com m entator, w ill s p e a k a t the p ra y e r b re a k fa st Ju ne 10. Robert E. Barnett, FD IC ch a irm a n, W a s h in g t o n , D. C., a n d N e w M e x ic o G o v e rn o r Je rry A p o d a c a w ill a p p e a r at the first g e n e ra l co nve ntion se ssio n June 10. Jeannette O d e n , a ssista n t vice p resident, M e llo n B an k, Pittsb urgh , w ill sp e a k at the w o m e n 's lu n ch eon Ju ne 10. A t p re ss time, M r. Barnett w a s to be rep laced a s a sp e a k e r b y F D IC Director G e o rg e A . LeM aistre. Convention Entertainment To Feature Luncheons, Sports Events and Luau SANTA F E —About 1,000 bankers from New Mexico and throughout the Southwest are expected to attend the New Mexico Bankers Association’s 66th annual convention here June 9-11. Al though the Hilton Inn has been desig nated the headquarters hotel, five other hostelries are participating—Desert Inn, Inn at Loretto, La Fonda, Sheraton Inn and the Bishop’s Lodge. Registration will begin at 8 a.m. June 9 in the Hilton lobby. At noon the same day, there will be a past presi dents’ luncheon at La Fonda’s Santa Fe Room. The Lili del Castillo Fla menco Group will entertain. From 6 to STATEMENT OF CONDITION of THE FIRST NATIONAL BANK OF ARTESIA, NEW MEXICO A t close of Business March 31, 1977 RESOURCES Loans and Discounts ........................ $22,405,447.59 Overdrafts .......................................... 60,140.61 Stock in Federal Reserve Bank . . . . 60,000.00 Banking House Furniture &Fixtures 542,580.18 U. S. Bonds .............. $3,249,140.90 O ther U. S. O bligations ......... 996,214.34 Other Bonds ........... 8,824,651.16 27,233,263.50 Federal Funds Sold 5,000,000.00 Cash and Due From Banks ......... 9,163,257.10 Income Earned, N ot C ollected .. . 651,545.40 Other Assets ...................................... ............ 4,793.33 TOTAL .......................................... $50,957,770.61 LIABILITIES C ap ita l ............................................... $ 1,000,000.00 Surplus ................................................ 1,000,000.00 U ndivided Profits and Reserves . . . 2,904,933.01 Special Reserves ............................... 170,115.46 Income C ollected, N ot Earned .. . 505,650.84 Deposits .............................................. 45,377,071.30 TOTAL .......................................... $50,957,770.61 OFFICERS CHAS. K. JOHNSON, President C. NEAL JOHNSON, Presidential Asst. C. F. HAMMETT, Sr. Vice-President VERNON WATSON, Vice-President DAVID T. SIMONS, Vice-President GEORGE H. FERRIMAN, CashierTrust Officer FLOYD E. HALL, Asst. Vice-President ROBERT ASLINGER, Asst. Vice-President BRENT HAMMETT, Asst. Cashier BILL R. CARPENTER, Asst. Cashier KIMERICK F. HAYNER. Asst. Trust Oflficer 38 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis D en ton R. H u d g e o n s, N M B A e.v.p., w ill g iv e h is a n n u a l report d u r in g the c o n v e n tio n 's final g e n e ra l sessio n Ju n e 11. HUDGEO NS 7 :3 0 that evening, conventioneers will be treated to a reception at the Bishop’s Lodge. Music will be provided by Mariachi de Santa Fe. Also on June 9, the men’s golf tour nament will be held at the Santa Fe Country Club. Players may tee off any time between 8 a.m. and 1 p.m. Lunch will be available at the club. The annual prayer breakfast is sched uled for 8 o’clock June 10 in the Inter national Ballroom of the Hilton. J. Spencer Kinard, Salt Lake City, Utah, radio and TV commentator, will speak, and music will be provided by the Gridiron Singers. Three women’s events are planned for June 10: The tennis tournament will be held from 8:3 0 -1 0 :3 0 a.m. at the Sangre de Cristo Racquet Club. A continental breakfast at 8 o’clock will precede the tournament. At 11:30 a.m., there will be a women’s luncheon in the Hilton’s International Ballroom, with Mrs. W. R. Nicks, wife of the NMBA president, presiding. Jeanette Oden, assistant vice president, Mellon Bank, Pittsburgh, will speak, and en tertainment will be by Derrik Lewis and members of the Musical Theater Association of New Mexico. A women’s bridge tournament will be held from 2 :1 5 -4 :3 0 p.m. in the Don Nicolas Room of the Hilton. At noon the same day, Mr. Nicks will preside at the president’s luncheon in Room A at the Inn at Loretto. Guests will include members of the executive council, committee and group chairmen, trust division and ABA New Mexico officers and convention speak ers. The Mexican Trio will perform. At 1 o’clock June 10, a men’s tennis tournament will be held at the Sangre de Cristo Racquet Club. The day will end with a 6 o’clock cocktail party on the Hilton patio, courtesy of State National, El Paso, Tex., and a 6 :3 0 luau in the Hilton’s International Ballroom. “Shalako-Up- The officers, directors and employees of CITIZENS STATE BANK, SPRINGER are proud that our president, W . R. Nicks, has served the New Mexico Bankers Association as president during the year, 1976-77. We appreciate the assistance and cooperation given to Mr. Nicks by New Mexico bankers during his term of office in his efforts and program on be half of the New Mexico Bankers Association. W . R. Nicks MID-CONTINENT BA N K ER fo r May 1 5 , 1 9 7 7 country” entertainment is planned. The first event for June 11 will be a buffet breakfast from 7 to 8:3 0 o’clock in the Hilton’s International Ballroom, with the following Santa Fe banks as hosts— Bank of Santa Fe, Cap ital National, First National, Santa Fe National and United Southwest Na tional. That night, a cocktail party from 5 -6 :3 0 —courtesy of E l Paso (Tex.) Na tional—will be held on the Hilton patio. The 6 :4 5 banquet will be held in the Hilton’s International Ballroom, with Mr. Nicks presiding. The dinner show will be provided by the Booker Bank Notes of First Bank, Booker, Tex., and there will be dancing from 9 p.m.-midnight to the music of Danny Ortiz and the Senators. ■ E R N E ST ROM ERO has been ap pointed CEO, Centinel Bank of Taos, succeeding Arthur L. Ortiz, who has resigned to become state banking com missioner. In other news at the bank, Beatriz Gonzales has been named to succeed Don Ambrose as a director. Mr. Romero joined Centinel Bank in January as senior vice president. He formerly was administrator for Taos. Mrs. Gonzales, owner of Taos Gravel Products and a cattle rancher, is the first woman to serve on the bank’s board. 'Bank Week' in New Mexico A'MUST' fo r Directors of State-Chartered Banks! Jo in in g N e w M e x ic o G o v e rn o r Je rry A p o d a c a (c.) fo r official recogn ition o f B a n k W e e k in the state are T h o m a s D. T a y lo r (l.)r ch., N M B A b a n k w e e k committee, a n d B o b N icks, N M B A pres. M r. N ic k s is pres., C itizen s State, Sp rin ge r. M r. T a ylo r is pres., C itizens B a n k, A lb u q u e rq u e . ■ SAM E. MASSEY has joined Farm ers & Stockmens Bank, Clayton, as as sistant cashier. He goes there from First Wichita National, Wichita Falls, Tex., where he had served for 13 years. ■ RO BLEY H ED RICK has resigned as vice president and cashier, First State, Truth or Consequences, to be come co-owner of the Hot Springs In surance Agency. W e ll sen d uT h e C ity D iffe re n t” to b a n k ers w ho ask it! W e think it’s the most useful introduction to Santa F e any visitor can receive. I t contains 40 color photographs and lots of inform ation you need to get acquainted. E n joy con vention more. W R IT E : SF N B , P.O . Box 969, Santa F e, N.M . 87501. "Bank Shareholders' Meeting Manual" A 60-page book designed to enable directors of state-chartered banks to bring their operations up-to-date. It was developed in recognition o f several new trends in business and society— trends involving an increased sensitivity of the public regarding conflicts-ofinterest; greater concern fo r minority rights; greater demand fo r fu lle r dis closure; data on control and ownership and of related business interests, includ ing voting o f trust-held securities. The book also provides a means fo r state bank directors to m odify pro cedures to bring their banks into com pliance with current state banking statutes and regulations. Its use can result in economies and efficiencies for banks. Can Your Bank Afford to be Out-of-Date? SEND YOUR ORDER AND CHECK (sorry, no billed orders) TO THE PUBLISHER: 124-126 WASHINGTON AVENUE SOUTHSIDE BRANCH: CORDOVA ROAD CERRILLOS ROAD BRANCH: AT HOLIDAY INN MEMBER FEDERAL RESERVE SYSTEM AND FEDERAL DEPOSIT INSURANCE CORPORATION MID-CONTINENT BA N K ER fo r May 1 5 , 1 9 7 7 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis The BANK BOARD Letter 408 Olive St. (Suite 505) St. Louis, Mo. 63102 39 Meet theleam that Gives You the Edge ■Hh h h I Bob Thompson Martha Mason Hubert Barksdale Our banking experts are ready to w ork for you, bringing to your door an extensive portfolio of correspondent banking services that will give your bank the professional banker’s edge you’ve been searching for. Hubert Barksdale’s responsibility will be Northern Arkansas, Missouri and Oklahoma, w hile Bob Thompson will have juris diction over Southern Arkansas, Louisiana and Mis sissippi. Martha Mason, Correspondent Bank O fficer with 13 years of banking experience joins our professionals and will be available at all times to respond to your inquiries. Norman Farris, Executive Vice President and head of our correspondent banking program, works with our professionals—and with y o u —to make certain you receive the best services we can deliver. ■SI Let CNB give you the professional banker’s edge. Call us toll-free: 1-800-482-8430. Norman Farris HSR C o m m ercial ■ ■ ■ N atio n al B ank OF LITTLE ROCK FDIC 40 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis MID-CONTINENT BA N K ER fo r May 1 5 , 1 9 7 7 Arkansas Convention President Hot Springs, May 14-17 Headquarters-ARLINGTON HOTEL PROGRAM FIRST SESSION, 9 a.m., M ay 16 KENNEDY Pres, o f the A r k .B A is W illia m H. K e n n e d y Jr., a n a tiv e o f Pine Bluff, w h e re he is pres., N a t 'l B a n k o f Com m erce. H e is a p a st ch., A B A G o ve rn m e n t R e lation s C ouncil, a n d h a s ch a ired A r k . B A 's Federal a n d State G o ve rn m e n t R e lation s comm ittees. President-Elect Call to Order—W ILLIAM H. KENNEDY JR., president, Arkansas Bankers Association, and president, National Bank of Commerce, Pine Bluff. Invocation. President’s Address—W ILLIAM H. KENNEDY JR. Address—A. A. M ILLIGAN, president-elect, American Bankers As sociation, and president and chairman, Bank of A. Levy, Oxnard, Calif. Address— LAW RENCE K. ROOS, president, Federal Reserve Bank of St. Louis. Address—JIM GUY TUCKER, U. S. congressman for Arkansas, Sec ond District. Announcements and Awarding of Door Prize. Adjournment. SECOND SESSION, 9 a.m., M ay 17 CUPP Cecil W . C u p p Jr. is A rk .B A pres.-elect, a n d pres. & C EO , A r k a n s a s B an k, H ot S p rin g s, a s w e ll a s ch., C itizen s First N a t'l, A rk a d e lp h ia . H e is a p a st dir., St. Louis Fed, a n d is a dir., First A r k a n s a s D evelop m en t Finance C orp. Vice President Call to Order—W ILLIAM H. KENNEDY JR. Report of the Treasurer—JOHN M. LEW IS, treasurer, Arkansas Bank ers Association, and president and CEO, First National Bank, Fay etteville. Meeting of Arkansas Members of the American Bankers Association— C EC IL W. CUPP JR., ABA vice president for Arkansas, and presi dent, Arkansas Bank, Hot Springs. Resolutions Committee Report. Election of Officers. Announcements and Awarding of Door Prize. Adjournment. Convention Speakers BROW N D o yl E. B ro w n is A r k .B A v.p., a n d pres., t.o. a n d dir., First N a t'l, W y n n e , w h ich he joined in 1938. H e is a p a st pres., Jr. B a n k e rs Section, a n d p a st ch.. A rk .B A G ro u p O ne. H e is a p a st ch. o f the A g ric u ltu re & R ural A ffa irs Com m ittee. MID-CONTINENT BA N K ER fo r May 1 5 , 1 9 7 7 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis ROOS M IL L IG A N 41 Speakers From ABA, Fed, U.S. Congress To Appear at 87th Arkansas Convention D ELEG A TES to the 87th annual con vention of the Arkansas Bankers Association will be thoroughly informed on major issues affecting banking at the upcoming meeting set for May 14-17 in Hot Springs. Speakers for the convention include A. A. “Bud” Milligan, ABA president elect, and president and chairman, Bank of A. Levy, Oxnard, Calif.; Lawrence K. Roos, president, St. Louis Fed; and Jim Guy Tucker, member of the U. S. House of Representatives from Arkansas’ sec ond district. Mr. Milligan began his banking ca reer in 1940 at Bank of A. Levy, which was started by his grandfather some 90 years ago. Following military service in World War II, he was named assistant secretary of the bank and a director and executive officer in 1950. He assumed his present posts in 1955. He is a past president of the California Bankers As sociation and has been active in ABA since 1964, serving on the governing council, the executive council, the task force on policy and planning of banking education and training, the advisory committee on state legislation and the nominating committee. Mr. Roos is a former president of Mound City Trust, St. Louis; former chairman of First Security Bank, Kirk wood, Mo.; and former executive vice president and director of First National in St. Louis. He served two terms in the Missouri House of Representatives and spent more than a decade as supervisor of St. Louis County, one of the largest county governments in the U. S. He as sumed his present post in March, 1976. Congressman Tucker was elected in 1976 to succeed retiring Wilbur Mills. He serves on the Ways and Means Com mittee and the Social Security and Pub lic Assistance and Unemployment Com pensation subcommittees in Congress. He served two terms as Arkansas at torney general. The convention calendar begins with registration from 2 to 6 p.m. on Satur day, May 14. Sunday’s activities include registration from 1 to 6 p.m., exhibits from 1 to 5 p.m., meetings of the nomi nating and resolutions committees and the executive council. Also on tap is the traditional reception for all del egates starting at 6 p.m. Registration begins at 8 a.m. and con tinues to 5 p.m. on Monday, May 16, and exhibits will be open from 1 to 5 p.m. The first business session convenes at 9 a.m. and a tennis tournament will get underway at 1:30 p.m at the Hot Springs Country Club. Registration will continue throughout Tuesday, as will the exhibits. The sec ond business session will start at 9 a.m. and a women’s luncheon will begin at 12:30. A golf tournament is set for 1 p.m. and a tennis tournament at 1:30, both at the Hot Springs Country Club. The convention will conclude with the traditional banquet beginning at 7 p.m. Banquet speaker will be George Will, columnist for the Washington (D. C.) Post. ■ GEORGE W. PENICK, vice presi dent and board secretary, First Nation al, Mena, has been elected president, Mena Area Chamber of Commerce. ■ A MOVE by Bankstock One, Inc., Ozark, to become an HC through ac quisition of Bank of Ozark has been denied by the Fed. Specializing in Arkansas M unicipal Bonds Since 1931 COMPLETE INVESTMENT SERVICE TO BANKS OFFERINGS BIDS APPRAISALS Hill, Crawford & Lanford, Inc. MEMBERS SECURITIES INDUSTRY ASSN. N A T IO N A L ASSOCIATIO N OF SECURITIES DEALERS, INC. SECURITIES INVESTORS PROTECTION CORP. ARKANSAS BANKERS ASSN. BOYLE BUILDING LITTLE ROCK HARROW SMITH COMPANY Union National Bank Bldg. 5 01 /37 4 -7 55 5 Little Rock, Arkansas J. E. WOMELDORFF, Executive Vice President PHONE 5 0 1 /37 4 -8 27 6 42 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis MID-CONTINENT BA N K ER fo r May 1 5 , 1 9 7 7 Ark.BA Treasurer Jo h n M . Lew is is treas., A rk . B A a n d pres. & C EO , First N a t'i, F a y etteville. H e joined the b a n k a s p re sid en t in 1 9 7 4 a n d w a s n am e d c h a irm a n and CEO this ye ar. H e w a s fo r m erly w ith a n in v e st m ent b a n k in g firm a n d w ith R ep u b lic N a t'i, b oth in D allas, fo r a tota l o f 13 ye ars. H is fath er, H erbert Lew is, retired, is fo rm e r pres. & ch., First N a t'i, F a y etteville. to all sectors of the economy. Only then can we achieve the economic growth that is our national goal. • • More Consumer Credit Forecast For Home-Improvement Loans WASHINGTON, D. C.— Increased availability of consumer credit is fore cast by the nation’s banks, which sup ply more than half of all home-improve ment loans. A national banking survey—the re sults of which were released by the ABA last month— shows that 95% of the responding banks plan to expand consumer loans for home improve ments. In a survey last year, the same ■ JOHN T. JON ES has been named assistant vice president and installment loan department manager, Union Na tional, Little Rock. He joined the bank in 1976 as a branch office manager. Credit Allocation (C ontinued from p ag e 26) ing to effectively influence the way credit is allocated in this country. And they also can appreciate the threat that such action represents to our customers’ individual economic free dom. I recently heard Gilbert Grosvernor, editor of N ational G eographic, com ment on the guiding philosophy of his magazine. As you may know, N ational G eographic has been around for 90 years—yet it is reportedly No. 2 in magazine circulation in the country. That’s a pretty good record, and it may be due to what Mr. Grosvernor said: “For a magazine, revolutionary change is fatal—evolutionary change is manda tory.” I think there’s a message for our credit markets there. We cannot hope to forestall every change in government policy on the flow of credit in this nation—nor should we attempt to do so. But we must make sure that these changes take place in a natural evolutionary way—taking full advantage of market forces and avoid ing the rigid, revolutionary shifts in policy that could wreak havoc in our economy. In seeking to influence these changes, we must make sure that all participants in the credit markets— especially government—understand the full effect of both subtle and overt attempts to allocate credit through government intervention. And we owe it to our customers— consumers and businesses alike— to make sure that Congress and the regulators understand these effects, too. Only then can we help design effective government poli cies that really do what they are de signed to do—provide adequate credit MID-CONTINENT BA N K ER fo r May 1 5 , 1 9 7 7 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis question found that 85% were expand ing this type of credit. Currently, there is more than $8.8 billion outstanding in consumer in stallment home-improvement loans, and $5.4 billion of that amount has been supplied by banks. According to the ABA’s Installment Lending Division, the typical home-improvement loan is for about $3,000, requires no collateral, carries a 10% to 14% annual interest rate and has a pay-back period of from five to seven years. The 150 banks surveyed belong to the division’s advisory board and rep resent a demographic sampling of the nation’s 14,700 banks. Welcome, Arkansas Bankers, to Hot Springs May 15-18 43 Our annual report for 1976 highlights the progressive strides being taken in the many levels of schools in South Mississippi. They are producing knowledgeable, highly skilled, educated citizens certainly among our most valuable assets. We would be pleased to send you a copy. Just write our president, Leo W. Seal, Jr., P.O. Box 4019, Gulfport, Mississippi 39501. Hancock Bank M em b e r FDIC OFFICES: Bay St. Louis, Gulfport, Pass Christian, Long Beach, Northeast (Pass Road, Gulfport), Mississippi City-Handsboro, Edgew ater, Norw ood V illage, Mississippi Test Facility (NSTL), U.S. Navy CB Center, Poplarville (Bank of C o m m erce), Picayune (Bank of Picayune), Bay-W aveland (Hwy 90, Bay St. Louis) 44 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis MID-CONTINENT BA N K ER fo r May 1 5 , 1 9 7 7 President Biloxi, May 14-18 Headquarters—Biloxi Hilton & Broadwater Beach Hotels M IT C H E L L Jo h n H. M itchell Jr., M B A pres., is v. ch. & C EO , N a t 'l B a n k o f C om m erce, Starkville. He entered b a n k in g at G re n a d a B a n k in 1950, g o in g to his present b a n k 10 y e a rs later as e.v.p. H e a d v a n c e d to pres, in 1964. H e is a fo rm e r Y o u n g B a n k e rs pres. Vice President PROGRAM FIRST SESSION, 9:15 a.m ., M ay 16 Call to Order and Invocation. Executive Committee Report—JOHN H. M ITC H ELL JR., president, Mississippi Bankers Association, and vice chairman and CEO, Na tional Bank of Commerce, Starkville. Resolutions— M. F . KAHLMUS, committee chairman, and president, Merchants & Farmers Bank, Meridian. Financial Report— R. D. GAGE III, Mississippi Bankers Association treasurer, and president and CEO, Port Gibson Bank. Young Bankers Section Report— GLYNN HUGHES, president, Young Bankers Section, and president, South Central Bank, Silver Creek. Standing Committee Reports. Address— R O BERT W . WARREN, conservator for savings and loan associations, Jackson. S M IT H S e rv in g a s v.p. o f the M B A is R a y K. Smith, pres. & C EO , First N a t'l, Greenville. H e joined the b a n k in 19 5 7 a n d h a s been pres. & C E O since 1972. He h a s serve d on m a n y M B A com m ittees a n d w a s assn , treas. in 1975. Treasurer SECOND SESSION, 9:30 a.m., M ay 18 President’s Address—JOHN H. M ITC H ELL JR. Report on School of Banking of the South— DR. BEN McNEW, as sistant director, School of Banking of the South. Meeting of Mississippi Members of American Bankers Association— CRAW FORD McGIVAREN, ABA vice president for Mississippi, and vice chairman and acting CEO, Bank of Clarksdale. Presentation of 50-Year Club Certificates. Address—A. A. MILLIGAN, president-elect, American Bankers Asso ciation, and president, Bank of A. Levy, Oxnard, Calif. Necrology Committee Report— ORRICK M ETCA LFE, committee chairman, and chairman, Britton & Koontz First National, Natchez. Resolutions Committee Report— M. F. KAHLMUS, committee chair man. Report of Nominating Committee. Election of Officers. GAGE M B A treas. is R. D. G a g e III, pres. & C EO , Port G ib so n B an k, w h ich he joined a s cash. & v.p. in 1952 after p ra cticin g la w fo r five ye a rs. He w a s n am e d pres. & C E O in 1967. MID-CONTINENT BA N K ER fo r May 1 5 , 1 9 7 7 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 45 A BA President-Elect Set for Miss. Convention In Biloxi M a y 14-17 B ILO X I—ABA President-Elect A. A. “Bud” Milligan will head the list of speakers scheduled for the 89th annual convention of the Mississippi Bankers Association, which will convene here May 14. Headquarters hotels will again be the Biloxi Hilton and the Broad water Beach. Theme of the convention is “The Great Getaway,” which is also the title of the Monday evening dinner and en tertainment set for the Hilton’s Grand Your Canton Business Invited C A N T O N WE WELCOME THE OPPORTUNITY EXCHANGE B A N K to s er ve y o u CANTON, MISSISSIPPI "In Our 97th Year" BRANCH OFFICES: MADISON— RIDGELAND— EAST CANTON SHOPPING CENTER Common Capital $675,000.00 _ I r i Earned Surplus $1,750,000.00 j , . ° 3 Resources ° ver $39,000,000.00 MEMBER FEDERAL DEPOSIT INSURANCE CORPORATION For Every Banking Service SeCURITÏ PflflKCORINTH, MISSISSIPPI Active Markets Mississippi Municipal Bonds MEMBER F.D.I.C, Specializing in Louisiana and Mississippi Municipal Bonds C flu L S a n 9 C o m p a n y JACKSO N, MISS. Investments LAM AR LIFE BLDG. Hattier, Sanford &Reynoir IN V E S T M E N T PHONE 353-6326 LESTER A L V IS LESTER A LVIS, JR. FERRI LL BATTLEY 46 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Ballroom. The first day of the convention is for those who enjoy golf and tennis. The golfers will start out at noon on Saturday, May 14, at the Broadwater Sun Course. Tennis buffs will hit the courts at 8:30 a.m. at both hotel’s courts. Registration will open at 2 p.m. in the Hilton lobby and the first party will be hosted by First Mississippi Na tional, Hattiesburg, in the Hilton Ball room that evening. Registration will begin at 9 a.m. on Sunday, May 15. The tennis tourna ment finals will be held at noon at the Broadwater courts. The partying begins at 3, when Central Bank, Birmingham, holds forth in the Hilton Ballroom, fol lowed shortly thereafter (5:30 p.m.) by the Deposit Guaranty National of Jackson poolside bash at the Broadwater. The MBA executive committee and past presidents’ dinner will begin at 8 p.m. at the Broadwater. At 10 p.m., National Bank of Commerce, Memphis, will host delegates at a party at the Hilton Ballroom. On Monday, May 16, registration will begin at 9 a.m., to be followed by the first general business session at 9:15 at the Hilton Grand Casino. The busi ness will be over by 11 a.m. so every one can attend the party in the Hilton Ballroom hosted by First National, Jackson. Things will quiet down until 4 p.m., when the oyster bar sponsored by Hancock Bank, Gulfport, begins at the Hilton. The MBA cocktail party will begin at 6:30 p.m. in the Hilton Grand Casino, to be followed at 7:30 p.m. by the Great Getaway Party in the Hilton Grand Ballroom. Featured en tertainment: Danny Davis and the Nashville Brass. Tuesday’s events get underway with a breakfast at 8 a.m. for those associ ated with the School of Banking of the South at the Broadwater. Registration will commence at 9 a.m., followed by the second business session, beginning at 9:30 a.m. at the Broadwater. The Union Planters of Memphis stag lunch eon will begin at 11:30 a.m. at the Broadwater, while a women’s luncheon will be held at the same hour at the Hilton. The oyster bar will be repeated at 4 p.m. at the Broadwater, again sponsored by Hancock Bank, Gulfport, and the MBA annual banquet will be gin at 7:30 p.m. at the Broadwater. That’s all until next year! BANKERS Whitney Building, New Orleans, La. 70130 (504) 525-4171 MID-CONTINENT BA N K ER fo r May 1 5 , 1 9 7 7 Are ATMs for Your Bank? These Two Independent Research Studies Can Provide Answers......Save Your Bank T IM E and M O N E Y Why re-invent the wheel? If you're considering the feasibility of ATMs for your bank, you'll save hundreds of man-hours on research by utilizing these studies created by the First Na tional Bank of Galesburg, III. And you may find that ATMs are not fo r you, thus saving your bank thousands of dollars of capital investment! The Galesburg bank, incidentally, has a successful track record with its ATM. It has, w ith its ATM, increased its market penetration of NEW AC COUNTS from 37% to 56% in a fourbank community! And 16% of new checking accounts and 20% of new savings accounts came from competing banks. T B IJiB B MUUWPAfc | HERE'S WHAT IS PROVIDED IN THESE TWO M ANUALS Also: newspaper reports of CBCT regulatory rulings . . . a 35-page "interpretive ruling" by the Comptroller. All valuable information to help your bank reach a pro per decision on ATMs. ELECTRONIC TELLER PROGRAM INSTALLATION MANUAL In 275 pages, this manual tracks the Galesburg bank's ATM operation through market analysis, cost justifica tion, installation procedures and results. One chapter shows actual samples of supplies used in the program, plastic cards, machine receipts. Another chapter discusses customer identification programs, with advertising used to announce ATM services. Manual recommends HOW to issue user cards. . . per sonnel and department to be assigned responsibility. . . also some do's and don'ts affecting any ATM program. CBCT REPORT TO MANAGEMENT This smaller report summarizes estimated vs. actual results of ATM operations. . . activity reports. . . income and expense items. . . also a seven-year projection of growth of checking and savings accounts originating from ATMs. MID-CONTINENT BA N K ER fo r May 1 5 , 1 9 7 7 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis MONEY BACK GUARANTEE - I f not completely satisfied, return within 10 days for full refund. | M ID -C O N T IN E N T B A N K E R 408 Olive St., St. Louis, Mo. 63102 I Please send_____ copies of: Electronic Teller Program Installation Manual and CBCTReport to Management Check enclosed * $ ___________ 1 I I | Name ________ ____________________ T itle ___________ I I I j B a nk________________________________________________ j I I I S tre et_______________________________________________ | I I City, State, Z ip _______________________________________ j * Check m u st acco m pan y o rd e r. We pay postage and h a ndling . M issouri banks: in clu d e 434% sales ta x . 47 W hat’s ours can be yours* Li ke our Cash Management Services for your custc >mers’ needs. Call on our experience. If you d on ’t have the Cash Management and Lock B ox Services your custom ers need, we do. We make them available to all of our correspondent banks, to offer as their own. A correspondent banking arrangem ent with Third National enables you to offer your cor porate custom ers a com plete range o f Cash Management and L ock B o x Services...custom - tailored to each custom er’s individual require ments. In addition, it provides your custom ers... through you...w ith the financial expertise of our m any specialists. Useful knowledge th at can be applied to many phases of your cus tom ers’ operations. Whatever your correspon dent banking needs, we can fulfill them . Our Tennessee WATS line is (8 0 0 ) 3 4 2 -8 3 6 0 . In neighboring states, dial IN NASHVILLE (8 0 0 ) 2 5 1 -8 5 1 6 . Member FDIC Celebrating 50 years of service. 48 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis MID-CONTINENT BA N K ER fo r May 1 5 , 1 9 7 7 President Chairman Gatlinburg, May 15-17 Headquarters—Sheraton Hotel PROGRAM W IL L S O N W EATHERFORD H u g h M . W illso n , T B A pres., is pres., C itizen s N a t'l, A th en s, a n d a dir., M o n r o e C o u n ty B an k, Sw ee tw ate r. H e is a fo rm er dir., N a sh v ille B ranch, A tla n ta Fed. T B A Ch. Jack O. W e a th e rfo rd is ch., M u rfre e sb o ro B a n k, w h ich he joined in 1949. He a d v a n c e d to his p re sen t p ost in 1970. H e is fo rm e r ch., T B A State Div. M ONDAY, M AY 16 9 :3 0 a.m.—Joint Meetings, State and National Bank divisions. Noon— Men’s Luncheon. 2 p.m.— Board of Directors meetings. TUESDAY, M AY 17 7 :4 5 a.m.— Independent Bankers Division Breakfast. Exec. Vice Pres. G IL L IA M President-Elect B U L L IN E R R ob e rt M . G illia m is T B A e.v.p. a n d treas. He is a p a st pres., Sou th ern C o n fe re nce o f B a n k in g A sso c ia tio n E x ecutives. T B A Pres.-Elect Jac k R. B ullin er is pres., First State, H en d e rson , w h ich he joined in 1948. H e w a s pres., Y o u n g B a n k e rs Div., in 1963. 1st Vice Pres. BUSINESS SESSION, 9:15 a.m. Call to Order— HUGH M. W ILLSO N, president, Tennessee Bankers Association, and president and CEO, Citizens National Bank, Athens. Welcome. Report of the ABA Vice President for Tennessee—W ALTER BARNES, ABA vice president for Tennessee, and presi dent, First National Bank, Jackson. President’s Address— HUGH M. W ILLSON. Address— GERALD M. LO W RIE, executive director, gov ernment relations, American Bankers Association. Address— B E R T LANCE, director, Office of Management and Budget, Washington, D. C. Election of Officers. Adjournment. 12:30 p.m.— Board of Directors Luncheon. 6 p.m.— Reception. 7 p.m.— Banquet. 2nd Vice Pres. Convention Speakers F IL L E B R O W N TAYLO R S e r v in g a s T B A 1st v.p. is T. Scott Filleb row n Jr., v. ch., First A m te n n Corp., N a sh v ille . H e h a s serve d on n u m e ro u s T B A comm ittees. LANCE G e o rg e R. T aylor, T B A 2 n d v.p., is pres. & ch., M e r ch a n ts B a n k, C le ve la n d , w h ich he joined in 1945. He w a s elected pres, in 1 9 7 0 a n d ch. in 1975. MID-CONTINENT BA N K ER fo r May 1 5 , 1 9 7 7 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 49 Young Bankers Elect Officers Bankers, Government Officials on Tap For Annual Tennessee Bankers Meeting HOST of bankers and government officials will mount the podium during the Tennessee Bankers Associa tion convention May 15-17 at the Smoky Mountain resort of Gatlinburg. The first talks will be given at the combined state and national division meeting, which will get underway at 9 :3 0 a.m. on Monday, May 16, at the headquarters hotel, the Sheraton. Addressing the joint meeting will be Thomas A. Wiseman, general counsel, Interest Rate Information, Inc., and Harlan Matthews, Tennessee s ta te treasurer. At 10:30 a.m., the meeting will adjourn and the state division will convene to hear addresses by Joe Hemphill, Tennessee banking commis sioner, and Lawrence E. Kreider, execu tive vice president-economist, Confer ence of State Bank Supervisors. The national division will also hold its own session at 10:30 and will hear Robert Forrestal, senior vice president and general counsel, Atlanta Fed, and Bruce Heitz, regional administrator of national banks, Memphis office. Chairman of the state division is R. Arch Fitzgerald, executive vice pres ident, Cleveland Bank. Chairman of the national division is James F. Smith Jr., president, Park National, Knoxville. The independent bankers division will meet for breakfast at 7:4 5 a.m. on Tuesday, May 17, to hear Howard A Bell, executive director, Independent Bankers Association of America. Chair man of the division is James R. Fitzhugh, president, Bank of Ripley. Two speakers will address the busi ness session of the convention on Tues day. They are Gerald M. Lowrie, ex ecutive director, ABA government re lations division, whose topic will be “Legislation and Regulation— Som e Realities,” and Bert Lance, director, Office of Management and Budget, Washington, D. C., and former presi dent and CEO, National Bank of Geor gia, Atlanta. Recreation will not be overlooked during the convention. Golf and tennis tournaments will be held on Monday, May 16, at the Gatlinburg Golf & Country Club and at the Mynatt Park tennis courts. Entertainment will be offered on Monday and Tuesday evenings. Mon day’s banquet and program will feature Woody Herman and his Thundering Herd. After a reception, dinner and performance by the band, there will be dancing. On Tuesday evening new officers will be installed during the annual banquet. Entertainment will be provided by stars of the Lawrence Welk TV show. A program for the women will in clude breakfast at Glenstone Lodge on Monday, followed by a shopping tour. Bank Hosts Consumer-Law Seminar The Y o u n g B a n k e rs D iv isio n o f the Tennessee B a n k e rs A sso c ia tio n held its a n n u a l co nve ntion la st m onth in G a tlin b u rg . Top p h o to s h o w s n e w officers b e in g co n g ra tu la te d b y d iv isio n C h a irm a n Lee B ee m an (r.), president, Liberty B a n k o f Tennessee, A th en s. From left, n e w officers a re Jim H enry, president, O a k la n d Dep osit B a n k — president-elect; Tom H o lla n d , vice p re sid en t & cashier, U n ion N a tio n a l, Fayette v ille — president; a n d J. N. M c G u ire Jr., a s sista n t vice p resident, P a rk N a tio n a l, K n o x v ille — vice president. Bottom p h o to s h o w s n e w d i rectors o f d iv isio n : (from left) Eden Sm ith, a s sista n t vice president, Secon d N a tio n a l, Jacks o n — G ro u p 6; K e n Sou th ern, executive vice president, C ity & C o u n ty B a n k, K n o x v ille — G ro u p 2; a n d M ik e M ille r, a ssista n t vice p re si dent, First A m e ric a n N a tio n a l, N a s h v ille — G ro u p 4. On Tuesday, a tour to Cades Cove is scheduled, which will include box lunches at the Cove’s picnic area. A hospitality room will be open at the Sheraton on Tuesday morning with a hostess on duty. A shuttle bus will be operating be tween the Glenstone and Sheraton ho tels on Monday and Tuesday. Shuttle service to the downtown area will also be available during the convention. Registration for the convention will be held all three days, beginning at 2 p.m. on Sunday and at 8:3 0 a.m. on Monday and Tuesday. Registration will take place in the lower foyer of the Sheraton Hotel. • • ■ JACK BRAY, comptroller, C & I Bank, Memphis, has been named senior vice president. He joined the bank in 1956. In addition, Bob Huffman, senior vice president and director of adminis tration and operations, has been ap pointed cashier. He has been with C & I since 1973. G a the re d fo r a p h o to se ssio n a re fe atu red p a rtic ip a n ts in First T ennessee B a n k o f M e m p h is ' " Y o u r B a n k 's C o m p lia n ce W ith N e w C o n su m e r L a w s " se m in a r (fo re gro u n d , from I.): Ja m e s A. Kin ne y, e.v.p., host b a n k ; A n n e G e a ry, Fed atto rn ey; S u s a n A. M e ye r, editor, W ashington Credit Letter; a n d M ilto n W . Schober, W a s h in g t o n credit counsel fo r the A m e ric a n Retail Federation. To the rear a re C h a rle s C. C a u d le (I.), v.p., co nsu m e r b a n k in g div., First U nion N a t'l, C harlotte, N. C.; a n d R ich ard Slater, e.v.p., C o n su m e r B a n k e rs A ssn . 50 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis MID-CONTINENT BA N K ER fo r May 1 5 , 1 9 7 7 CORNERSTONE Memphis Bank & Trust is becoming the cornerstone of area banking. More and more banks, over 100 now all over the Mid-South, are banking w ith Memphis Bank & Trust. We have the fastest growing Correspondent Bank Department in Dixie. We're in that position not just because we offer the full range of banking services, other banks also offer impressive shopping lists. Nor are we making it just because we're big, some banks are bigger. Banks are banking on us for the same reason our other customers d o ... we're dependable. We're the most solid bank in town, stonesolid, and we back our services with personal attention and unbeatable experience. We throw in some extras, too, that bankers appreciate, like expert insurance capability, guidance in the construction and design of bank fa c ilitie s ... even selection of furnishings. Solidarity plus the personal touch and the willingness to take the extra step have made Memphis Bank & Trust the fastest growing major bank in M em phis... in all departments. That same philosophy iis making us the bank where bankers bank in the Mid-South. Jh the bi99est com pliment a banl* M em ber FDIC M E M P H IS B A N K © 7T RU ST Correspondent Bank D epartm ent/ln Tennessee, 1-800-582-6277/ln other states, 1-800-238-7477 THE BANKER'S B A N K MID-CONTINENT BA N K ER fo r May 1 5 , 1 9 7 7 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis £mum Frank Nichols ( le f t ) perfects correspondent services with the help of Jim Burkholder and the entire Louisville Trust Bank. □ Frank Nichols and Jim Burkholder are dedicated to giving you excellent service. □ You can count on getting it quickly, pleasantly, and efficiently from the Louisville Trust Bank. One convenient number — 502/589-5440... and you get action... no runaround to waste your time. □ Louisville Trust Bank’s growing correspondent banking group is backed up by every other bank employee. That means that, regardless of the type of counsel or financial service you need, it’s available instantly through our Correspondent Bank Department. The emphasis still continues on a quality of personal service that really contributes to your growth as well as otirs. It can be pension plan... operations information. . . portfolio investment service... key executive personnel placement...or the usual loan participation □ Whatever your needs— in any area of your bank or ours —give us a c a ll... Frank or Jim! One Riverfront Plaza Louisville, Kentucky 40202 502/589-5440 Member Federal Reserve System, Federal Deposit Insurance Corporation Indiana Convention President French Lick, June 15-16 FARRELL IB A pres, is W illia m C. Farrell Jr., pres. & C EO , Elston B an k, C ra w fo rd sv ille . A b a n k e r since 1947, he h e a d e d co rp o rate b a n k in g div. (in clu d in g corres. b a n k s div.) at A m e ric a n Fletcher N a t'l, In d ia n a p o lis, w h e n he joined Elston B a n k in 1969. Headquarters-FRENCH LICK-SHERATON HOTEL PROGRAM FIRST SESSION, 9:30 a.m ., June 15 Vice President voss Tom G. V o s s is IB A v.p., a n d pres. & C EO , S e y m o u r N a t'l, w h ic h he joined in 1967. H e is a dir., L ou isville B ranch, St. Lou is Fed, a n d is a p a st ch. o f the IB A le g isla tiv e com. Call to Order and President’s Message— W ILLIAM C. FA R R ELL JR., president, Indiana Rankers Association, and president and CEO, Els ton Bank, Crawfordsville. Report of Nominating Committee. Election of Officers. Treasurer’s Report—W ILLIAM H. KING, treasurer, Indiana Bankers Association, and president and CEO, Second National Rank, Rich mond. Address—W. LIDDON M cPETERS, president, American Rankers As sociation, and president, Security Rank, Corinth, Miss. Address— DALLAS W O LF, treasurer, Shell Oil Co., Houston. Topic: “The Impact of Energy on the Financial Community.” Address— DR. LEONARD L. BERRY, chairman, department of mar keting, Georgia State University, Atlanta. Adjournment. SECOND SESSION, 9:30 a.m., June 16 Treasurer Call to Order—W ILLIAM C. FA R R E L L JR. Meeting of Members of the American Bankers Association. Address—DUANE J. McCULLOUGH, senior vice president, Fannin Bank, Houston. Address— KERM IT O. BURROW S, speaker, Indiana House of Rep resentatives. Address—To Be Announced. Adjournment. K IN G IB A treas. is W illia m H. K in g, pres., Second N a t'l, Richm ond, w h ich he joined in 196 5 after service w ith Terre H a u te First N a t'l. H e is a fo rm e r ch., IB A trust com. MID-CONTINENT BA N K ER fo r May 1 5 , 1 9 7 7 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 53 WRITTEN LOAN POLICY Every Bank Should Have One! "The Bank Board And Loan Policy" Provides the Information Needed to Formulate a Written Loan Policy or Update an Existing One! A m ust fo r b a n k s, th is 4 0 -p a g e m a n u a l tells w h y all b a n k s sh o u ld h a v e w ritten lo a n policies a n d h o w the y can fo rm u late o r u p d a te such p olicies to se rve a s g u id e s fo r le n d in g officers a n d to help protect the b a n k fro m m a k in g costly com m itm ents. The m a n u a l pre sen ts the lo a n policies o f fo u r w e ll-m a n a g e d b a n k s a n d con ta in s a ra tin g fo rm u la fo r secured a n d u nsecured lo ans, c o n d itio n a l sa le s con tracts, all m o rtg a g e s, go v e rn m e n t a n d m un icip al b o n d s a n d g o v e rn m e n t a g e n c y securities. Topics sp o tligh te d include: • Conditional Sales Contracts • A ll Mortgages • Loans fo r Education Also included are sections on who should have lending authority, lending procedures, loan limits, credit depart ment responsibilities and loan examiner responsibilities. Can your bank afford to this manual? n • * . be without (Missouri banks add Price: $4.25 4'/2% tax) ORDER TODAY! (Sorry, no billed orders) The BANK BOARD Letter 408 O live St., Suite 505 St. Louis, MO 63102 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis National, Indianapolis; William H. Olds, president, Marion National; and Robert C. Rose, president, American National, Vincennes. Reach for Bonanza' Western Theme Set For Indiana Convention This year’s Indiana Bankers Associa tion convention is being touted as the “IBA Roundup at the FLS Ranch” in ob servance of the western theme selected by the convention committee. The twoday annual meeting will be held at the French Lick-Sheraton (FLS) Hotel on June 15-16. The theme will come to full flower on Thursday evening when the “reach for the bonanza” entertainment event is held as the last official function of the convention. Things will be a little more sedate on Wednesday evening, when the annual banquet is held. Banquet speaker is J. N. Christianson of Christianson Com munications, Scottsdale, Ariz. A host of other speakers will mount the podium during the convention, be ginning with W. Liddon McPeters, ABA president, and president, Security Bank, Corinth, Miss. Mr. McPeters is expected to report on the state of banking in 1977. Other speakers include Dallas Wolf, treasurer, Shell Oil Co., Houston, whose topic is “The Impact of Energy on the Financial Community.” A bank market ing talk will be given by Dr. Leonard L. Berry, chairman, department of mar keting, Georgia State University, At lanta. A Houston banker, Duane J. Mc Cullough, senior vice president, Fannin Bank, will also appear, as will Kermit O. Burrows, speaker of the Indiana House of Representatives. Of course, there will be fun times during the convention, too. The men’s golf tournament will take place Wednes day at the Hill Country Club and the Valley Country Club. The women’s tourney is slated for the following day at the Valley course. A putting contest will be held Thursday for non-golfers, and tennis tournaments are set for both days. IBA Nominating Committee Picks Shaffer, McWhorter The IBA nominating committee has made the following selections for IBA officer positions for 1977-78: Tom G. Voss, president and CEO, Seymour National— IBA president; Paul E. Shaffer, chairman and president, Fort Wayne National—IBA vice president; Russell R. McWhorter, president, Citi zens Bank, Michigan City—IBA trea surer. Nominated for directors-at-large are Thomas N. Miller, president, Indiana ■ W ILLIAM M. BACON has been named chairman, Calumet National, Hammond. He retains his titles of pres ident and CEO. He joined the bank in 1958. ü RONALD D. EDW ARDS has been named Indiana division officer at Amer ican Fletcher National, Indianapolis. He joined the bank in 1976. L et us tell you about our mountainside swimming pools, golf courses, three lakes, tennis, social programs, dining and dancing. L et us tell you about our private bathhouse where you’ll find those world-famous H ot Springs ther mal waters. And let us tell you about our special summer rates. For Reservations Call Toll Free 8 0 0 /6 4 3 -5 4 0 4 Area attractions include I.Q. Zoo (training of per forming animals), a diamond mine, unique pottery works and some of the best fishing in the world. HOT SPRINGS ARKANSAS MID-CONTINENT BA N KER fo r May 1 5 , 1 9 7 7 Must Reading for Every Director and Officer! These Three Board-Related Books (Including Revised Edition of Conflicts of Interest) Conflicts of Interest Conflicts of Interest ftr tis<t Responsibilities 1mim. of Bank Directors Composition and Compensation of Bank Boards $ (1) C O N FLIC TS O F IN T E R E ST FO R D IREC TO RS AND O FFIC ER S O F FINANCIAL IN STITU TIO N S $6.25 . . . The new, revised edition includes everything directors and officers should know about the topic: Presents the problem of “conflicts,” gives examiners’ views of directors’ business relationships with the bank, examines ethical pitfalls involving conflicts, conflicts in trust de partments, details positive actions for reducing potential for conflicts. Other important data are the Comptroller’s ruling on statements of business interest of directors and principal officers of national banks and samole conflict of interest policies in use today that can be adapted by your board. N ew m aterial includes F D IC regulation on insider transactions. Q U A N T IT Y P R IC E S 2 -5 $ 5 .5 0 ea. 1 1 -25 $ 5 .0 0 ea. 6 -1 0 $ 5 .25 ea. over 25 $4.75 ea. (2) R ESPO N SIR ILITIE S O F BANK D IREC TO RS $4.95 . . . Written by Raymond Van Houtte, president & CEO of Tompkins County (New York) Trust Co., this book is “right” for to day’s problems. Due to the economic influence banks have on their commu nities, the rapid growth of holding companies and the ever-growing “con sumer” movement, directors must know what is expected of them and the bank they serve in terms of responsibilities to depositors, shareholders and the pub lic. R esponsibilities examines recent court decisions, investment return, con tinuity of management, long-range planning, effects of structural changes —HCs, branching, mergers—on com petition, and more. Q U A N T IT Y P R IC E S 2 -5 $ 4 .5 0 ea. 11-25 $ 4 .2 0 ea. 6 -1 0 $ 4.35 ea. over 25 $ 4 .1 0 ea. (3) COM POSITION AND COMPEN SATION O F BANK BOARDS $4.25 . . . A statistical analysis of bank boards based on comprehensive surveys by the . 2 5 author, Dr. Lewis E. Davids, editor of The BANK BOARD Letter. This book will give the reader an insight into the variety of occupations represented on bank boards,' the number of inside and outside directors; frequencies of meet ings; salaries paid. Also included are many tables, showing retirement ages for directors, per-meeting and annual fees, highest paid directors, etc. De signed to help you make comparisons and put your board structure and fees in proper perspective. Q U A N T IT Y P R IC E S 2 -5 $ 3.85 ea. 1 1-25 $3.35 ea. 6 -1 0 $ 3 .6 0 ea. over 25 $ 3.10 ea. THE BANK BOARD LETTER 408 Olive St., St. Louis, Mo. 63102 Send These Books: ............................. copies, Conflicts of Interest .............................. copies, Responsibilities of Bank Directors ............................. copies, Composition & Compensation Total enclosed $ $ $ $ Name .................................................................... Title ........... Bank ............................................................................................. Street ........................................................................................... City, State, Z ip ............................................................................ (Please sen d ch eck with order. In Missouri, ad d 4 % % tax.) MID-CONTINENT BA N K ER fo r May 1 5 , 1 9 7 7 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 4 55 But for the touch of a vanished hand . . . T en n y so n . Has your correspondent's hand vanished? A rn o ld and W e b e r . *T h e title painting from the Citizens Prairie Heritage Collection of 15 watercolors by Rob O’Dell. The collection is available on loan for special bank showings. CONTACT: Dale P. Arnold 217/424-2061 or David G. Weber 217/424-2063 LANDMARK MALL DECATUR, ILLINOIS THE CITIZENS NATIONAL BANK Member F.D.I.C. AN EXTREMELY HELPFUL BANK. 56 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis MID-CONTINENT BA N K ER f o r May 1 5 , 1 9 7 7 Illin o is C o n v e n tio n President Chicago, June 5-7 H eadquarters—PALMER HOUSE L IV A S Y R a y G. Livasy, IB A pres., is pres., M illik in N at'l, Decatur, w h ich he joined in 1965 a s e.v.p. He a d v a n c e d to pres, in 1966. P re v io u sly he h a d been w ith Illin o is Bell Telephone, Peoria, a n d B a n k o f Illinois, Decatur. He a lso is ch., M illik in M o r t g a g e Co., Decatur. 1st Vice Pres. T E N T A T IV E P R O G R A M FIRST SESSION, 9:30 a.m ., June 6 Presiding— RAY G. LIVA SY, president, Illinois Bankers Association, and president, Millikin National, Decatur. Presentation of Colors. Invocation. Welcome. Address— D R. W A L T E R H E L L E R , regents’ professor-economics, University of Minnesota, and former chairman, President’s Council of Econom ic Advisers. American Bankers Association Annual Meeting and Election— JO H N R. M O N TG O M ER Y I II, ABA vice president for Illinois, and presi dent, Lakeside Bank, Chicago. Report of Nominating Committee— D O N A LD R. L O V E T T , chairman, president and C E O , Dixon National. M ONTGOM ERY S e rv in g a s IB A 1st v.p. is John R. M o n t g o m e r y III, pres.. L ake side B ank, C h ica go , w h ich he joined in 1966. Prior to that, he h a d serve d N o rth e rn Trust, C h ica go , fro m 1952-65. He h a s attend ed the IB A Trust D evelop m en t Sch ool a n d h as serve d on the IB A fe d eral le gisla tiv e com. Door Prize Drawing. Adjournment. SECOND SESSION, 9:30 a.m ., June 7 Presiding— RAY G. LIVA SY. Panel Discussion on E F T featuring JO H N F IS H E R , vice president, City National Bank, Columbus, O. 2nd Vice Pres. Address— To Be Announced. Door Prize Drawing. Adjournment. THIRD SESSION, 2 p.m ., June 7 Presiding— RAY G. LIVA SY. IBA Annual Meeting and Business Session. Election of Officers. Adoption of Proposed Resolutions. Annual Reports— RAY G. LIV A SY and R O B E R T C. SC H R IM P L E , executive vice president, Illinois Bankers Association, Chicago. B ACK LU N D Adjournment. IB A 2 n d v.p. is B. F. Backlu nd , pres., B a rto n v ille Bank, w h ich he joined in 1970. H e entered b a n k in g w ith the N e b r a sk a B a n k in g Dept, in 1955, h a s serve d w ith D u n la p State a n d G la sfo rd State. He is a lso asso ciated w ith State Street B ank, Q u incy, a n d W y o m in g Bank. MID-CONTINENT BA N K ER for May 1 5 , 1 9 7 7 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 57 Governor, Economist Head Speaker List At IB A Convention CHICAGO—As this issue went to press, Governor James Thompson, Illi nois’ new governor, was slated to speak at the 86th annual convention of the Illinois Bankers Association, scheduled for June 5-7 at the Palmer House here. He will be the luncheon speaker, May 7. Also on the list of speakers is Dr. Walter Heller, economist at the Uni versity of Minnesota and former chair man of the President’s Council of Eco nomic Advisers. John Fisher, vice presi dent, City National, Columbus, O., and an acknowledged expert on electronic funds transfers, will appear on a panel devoted to E F T , and a speaker from the Shell Oil Co. is expected to be on the program, discussing the energy sit uation. On the entertainment side, the IBA banquet will feature the Glenn Miller Orchestra and show. Convention registration will begin at noon on June 5 and exhibits will open at the same hour. The IBA executive committee is scheduled to meet during the afternoon, to be followed by a meeting of the council of administra tion. The past presidents’ and past treasurers’ dinner will begin at 6 p.m. The Graduate School of Banking breakfast is the first item on the agenda for Monday, June 6. It will begin at 8 a.m. The registration desk and ex hibit area will open at 8:30 a.m. The first general business session will start at 9:30 a.m. and will feature pre- sentation of the colors, an invocation and welcome. The 50-Year Club luncheon is sched uled for noon, while a women’s lunch eon will be held from 11 a.m. to 4 p.m. The final day of the convention will see registration and exhibits open at 8:30 a.m., with the second general ses-/ sion opening an hour later. That ses sion will feature a panel discussion and report on E F T and one or more speak ers to be announced. The convention luncheon will be held at noon, with Governor Thompson scheduled to address the delegates. The third general business session will then be held, which will include an election of officers. At 6 p.m., a speakers’ table reception will be held, while the general IBA reception is held in an adjoining area. The convention banquet will begin at 7 p.m., with the Glenn Miller Orchestra providing the entertainment. IBA Treasurer Candidate Edm ond J. A rse neault, president, S o y C a p ita l B an k, Decatur, is a ca n d id a te fo r IB A treasurer. H e h a s been n o m in ate d b y the IB A n o m in a tin g committee. M r. A rse n e a u lt joined S o y C a p ita l B a n k in 195 9 a s a vice p re si dent a n d w a s elected p re sid en t in 1966. E.F.T.S.? We have a complete computer software* and marketing program for sale (The first IBM 3614 customer usage automated teller machine in the world) Contact G. Thomas Andes, Executive Vice President FIRST NATIONAL BANK OF B E L L E V I L L E Belleville, Illinois 62222 * Fully compatible with CICS and ETAM. 58 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Lemmerman Completes Year As Treasurer of IBA Jack D. Lemmerman is completing his year-long term as IBA treasurer. He was elected to the post during the 1976 convention. Mr. Lemmerman has been with Na tio n a l B a n k of Monmouth for 30 years and has been p r e s id e n t s in c e 1966. He is a past president of the Warren-Henderson LEM M ERM AN County B a n k e rs Federation and of IBA Group Six. He has chaired the IBA committee on bank management and is on the as sociation’s council of administration and its executive committee. He is a director of the Bank Administration Institute’s Western Illinois Chapter. Photographic Techniques Subject of Field Trips ARE YOU INTERESTED IN 19 Public Square IBA Candidate G a v in W e ir is the n o m ine e fo r IB A 2nd v.p. fo r 1977-78. He h a s been pres., C E O a n d a dir., C h ic a g o C ity B a n k, since 1970, a n d last J a n u a ry , a s sum ed the a d d itio n a l p ost o f ch. H e fo rm erly w as pres.. C o u n ty B a n k, Blue Isla n d . H is career a lso h a s in clud ed all p h a se s o f b a n k in g w ith the H e rita g e W E IR B a n k in g G rou p . Mr. W e ir is pres, a n d dir., C h ic a g o C ity B ancorp., a n d pres, a n d dir., C h ic a g o C ity Investm en t Co. H e a ls o is a m em ber o f the A B A 's G o v e rn in g Council. Phone (618) 234-0020 Residents in the area of Chicago City Bank were able to sharpen their photo graphic skills, thanks to free one-hour walking field trips sponsored by the in stitution. Each of two field-trip sessions fea tured an experienced photographer from the Washington Park Camera Club. The photographer acted as a guide, and provided instructions and answered questions on proper camera technique. In addition, Chicago City Bank provided a free roll of film to each participant. The tours were held in conjunction with a lobby display, entitled “The Camera and the City,” which was held at the bank. The display consisted of color and black-and-white photos taken by Chicago-area photographers and rep resented a diversified view of the city and its people. MID-CONTINENT BA N KER fo r May 1 5 , 1 9 7 7 O ur idea of correspondent banking: THE COMMITTEE OF ONE* Our people are real, live, experienced correspondent professionals, with y ears of correspondent banking behind them . They aren’t m anagem ent trainees or ju st goodwill ambassadors, so they can okay loans or services—like our new E F T S services—on the spot. W ithout going through unwieldy, time-wasting committees. WE CALL YOU BY NAME. NOT BY PHONE. You see, National Boulevard believes in person-to-person, eye-to-eye contact with the m anagem ent of every correspondent bank. Right th ere a t the correspondent bank. So things get done faster, friendlier. THE FUTURE STARTS TODAY And now our individualized services will be better than ever, because N ational Boulevard is ready for E FT S . Electronic Funds Transfer Systems. Fo r instance, our Central Information File is capable of transm itting information to correspondent banks. Soon, checking and savings accounts will be on line. Then, step-by-step, every correspondent service will be fully integrated into the system for more convenient, better banking. The bank for the New Downtown NATIONAL BOULEVARD BANK OF CHICAGO 400-410 North Michigan Ave., Chicago, 111. 60611 MID-CONTINENT BA N K ER fo r May 1 5 , 1 9 7 7 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Phone (312) 467-4100 Member FDIC 59 Issues in the Pricing of Bank Services Bankers must seek fa ir and equitable solutions to the perplexing pricing questions they fa ce I N R EC EN T years, appropriate pric ing of services has become a major concern of most large banks. I plan to analyze some of the problems that can arise in the costing and pricing of bank services. In addition, I plan to discuss the dilemma the Fed is facing with re gard to expanding access to its services. Interest in pricing bank services is, of course, derived from a variety of factors. As interest rates have risen and sophisticated cash management tech niques have matured, corporate trea surers have trimmed noninterest-bear ing balances to the minimum believed necessary to compensate banks for services. To a lesser extent, the same pattern has occurred in correspondent banking as smaller banks have sought to maxi mize earnings by selling large sums in the fed funds market and as multibank HCs have consolidated balances. In addition, rising levels of loan defaults, questions concerning adequacy of bank capital and profits and the likely devel opment of expensive new services, such as electronic funds transfers, have all created a renewed interest by banks in profitability of individual services and accounts. Standard approaches for measuring bank customer profitability also have been criticized. Bankers frequently maintain that customers are able to use the same balances to compensate for both loans and activity services. On the other hand, corporate treasurers have argued that bank profitability measures are not sufficiently accurate. Traditionally, banks have tended to cost and price only a small group of standard activity services. Other ser vices have been offered without charge. By setting prices on costed services sufficiently high to cover expenses of all services, banks have been able to obtain a rough indication of the costs of servicing individual customers. This approach, however, results in overstat ing costs of customers using few of the noncosted services and underestimating costs of those making extensive use of these services. As a result, corporate treasurers have objected. To avoid pay ing for services not actually utilized, 60 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis By ROBERT E. KNIGHT Research Officer and Economist Federal Reserve Bank Kansas City they have requested banks to “unbun dle” services and develop separate prices for each. Although use of “customer profit ability analysis” has been growing, at most banks with formal pricing ar rangements, the primary measure of individual customer profitability is ac count analysis. In performing an analy sis, a bank determines the revenue rep resented by an account by multiplying the average collected demand-deposit balance, generally adjusted for reserve requirements, by an earnings credit or allowance. Expenses of servicing the account are computed by multiplying the number of times a given service is utilized by the cost (frequently includ ing an allowance for profit) of provid ing the service. The difference between income and expenses represents the estimated profit the bank derives on the customer relationship. Although the general methods of performing an account analysis tend to be similar at different banks, annual account-analysis surveys conducted by the Kansas City Fed have found that prices of services often vary significant ly. In part, these differences reflect al ternative ways of calculating costs of services, variations in number of ser vices costed, competitive factors and differences in methods of treating indi rect costs, overhead and desired profit. Implications of some of these alterna tives can best be explained by an ex ample. Assume that a bank’s officers are considering the price that should be charged a corporation for servicing a direct-deposit payroll plan electronical ly. Under the arrangement, the com pany’s 1,000 employees no longer will be issued checks. Instead, the firm will The views expressed are the authors and do not necessarily reflect those of the Federal Reserve Bank of Kansas City or the Federal Reserve System. create a computer tape containing amounts due all employees, numbers of their respective banks and their ac count numbers at the banks. The tape then will be sent to the company’s bank, which will sort through it and re move any entries for employees who have their accounts at the bank. These accounts will be credited automatically and remaining entries on the tape for warded to an automated clearinghouse for processing and distribution to other banks. The first individual to speak might be the bank’s marketing officer: “It’s taken me a long time to convince this company that their employees will like this plan, and I’m anxious to see it suc ceed. W e should experience substantial cost savings because we no longer will have to process each employee’s check as it is cashed or cleared. Our comput er has plenty of excess capacity. Since the tape will arrive several days before payday, we can process it during a slack period. In view of our cost sav ings and the fact that this type of ar rangement is likely to be of growing importance in the future, I don’t think we should charge the company any thing.” The senior vice president in charge of operations might then rise: “I agree that we may experience some cost sav ings, but these will be small. Displac ing 1,000 checks per month will not presently allow us to let any employees go or retire any equipment. However, there will be direct costs associated with this program which the company should pay. Overtime may be required if our computer operators have to stay late to handle the tape. A charge, therefore, should be made for process ing the tape. Also, our fee should in clude computer processing time, extra bookkeeping that will be necessary and our transportation costs for delivering the tape to the automated clearing house. In my opinion, a flat fee of $8 for each tape received and a charge of 10 per entry on the tapes would just about cover these costs.” “Gentlemen,” interrupts the cost ac countant, “you are forgetting about our indirect costs! To handle this operation, MID-CONTINENT BA N K ER fo r May 1 5 , 1 9 7 7 Mosler Century 21 A new, modular alarm system that lets you plug in precisely the security you need. Vaults Line Security Surveillance Systems Automated Tellers Teller Stations and Offices Night Depositories The new Century 21—so flexible, so comprehensive, it lets you design precisely the se\v. curity system you need. From the larger main facility to the smallest branch. Even a free-standing auto mated teller machine. Plug-in modules provide for virtually any level of line security, whether on the premises or on remote reporting telephone lines. Expand it, change it, even relocate it—Century 21 is the most versatile alarm system ever. Century 21 has the basic protection circuits most fi nancial institutions now require: safe, vault, night depository, premise, automated teller machine, and remote drive-in burglary protection. Century 21 is available with daytime and 24-hour holdup signaling. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis The Century 21 alarm system is available in both UL and non-UL configurations, de pending on the level of risk. A completely auto matic or manual-set solidstate clock for controlled opening and closing times satisfies UL requirements. In addition, Grade A, B, and non-UL bells, with their different levels of attack security, may be selected. Three different levels of remote line security, starting with UL Grade AA, are provided by use of plug-in modules. All of this allows your security officer to select a level of protection in keeping with the risk involved. To learn more about Century 21, contact your Mosler sales representative Or write for our new brochure: Mosler, Dept. 21, 1561 Grand Blvd., Hamilton, Ohio 45012. Mosler An American-Standard Company H am ilton, O hio 45012 Brandt helps you bu ild better customer service Fast, efficient coin processing — the Brandt way C ustom er service is a vital asset of every bank. When you upgrade the speed and convenie nce of y o u r service, you im prove y o u r bank. S im ple as that. B randt helps you im prove the speed and convenience of coin processing. O ur high-speed 934 coin s o rte r/c o u n te r a u to m a tica lly sorts, totals, batch cou n ts and bags up to 600 mixed coins per m inute. T hat reduces the tim e y o u r custom ers w ill stand in any te lle r lines. A u to m a tic bag stops let y o u r te lle r dictate how m any coins are to be deposited in each bag. T h a t cuts dow n d ra stica lly on the tim e y o u r tellers w ill have to stand at any coin sorter. A t a glance, the 934 show s both batch and accum ulative totals, and an o p tio n a l p rin te r can a u tom ati cally record them . Im prove the e ffic ie n c y and re lia b ility o f y o u r coin processing w ith B randt, and y o u ’ll im prove the q u a lity of custom er service at y o u r bank. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Brandt Model 934 Coin sorter/co unte r Call your nearby Brandt Representative for all the details on our full line of high speed Coin Sorter/Counters. He’s in the Yellow Pages under “Coin and Bill Counting/Wrapping Machines.” Brandt Brandt, Inc. Watertown, Wl 53094 Brandt® Cashier® Countess® we will need to develop new computer programs. W e also should include al lowances for overhead, profit and costs associated with rent on the building, insurance, taxes, security guards and possibly the expenses of marketing the program to the company and its em ployees. Our cost studies have shown that a substantial savings from directdeposit programs will be realized only if a significant volume develops, but the number of transactions now is small. To cover the costs this program will entail during the first year, we will need to charge the company a fee of about 350 per entry on the tape. In the future, if other companies adopt directdeposit plans, we may be able to adjust the price downward.” The marketing officer shook his head sadly. “Most of these indirect expenses will be incurred whether or not we per form this program. In my opinion, if we charge those kinds of prices, no company will ever want to adopt a direct-deposit plan.” Which officer is correct? What should the company be charged? Noth ing? $18? $350? Might the situation be approached differently? Allocating costs in a multi-product firm such as a bank is always highly arbitrary. The difficulty is compounded further by the fact that banks generally must main tain staff and equipment to handle peak loads, but most of the time do not operate at capacity. The marketing of ficer who argued that no fee should be charged was trying to apply the mar ginal-cost principles he had learned in his sophomore economics course. How ever, he was forgetting that any pro gram always entails some marginal costs. The operations head remem bered, however, that—to avoid losses — average variable costs must be cov ered in the short run. In effect, he was stating that only costs directly attribu table to the program should be consid ered. General costs of being in business and top-management salaries should be absorbed elsewhere in the bank. The cost accountant was looking at the long-run situation in which total reve nue must exceed total costs. Clearly, alternative methods of analyzing a situ ation can give rise to large differences in estimated costs. Difficulties in costing bank services are manifold. At any time, most bank costs appear to be fixed. Plant and equipment expenses are sunk; most employees are salaried, and overhead normally shows little variance with out put. By comparison, the increase in total costs a bank incurs from providing a standard service to one additional customer is normally small—supplies, postage, computer time, perhaps occa sional overtime, etc. In the short run, any revenue gain in excess of these marginal costs adds to total profits. If the bank were to charge these costs, however, the charges would not make any contribution toward meeting the heavy fixed costs and could lock the bank into an unrealistic price structure. On the other hand, if the bank were to charge average total costs, the situa tion might be reversed. Most banks maintain substantial excess capacity. If the price were set equal to average total cost, the customer would be asked to pay not only for the cost of provid ing the service, but also for the cost of maintaining the excess capacity and any inefficiencies that may be present. Studies that show the average cost of performing services in an efficient manner—standard cost studies— can be used to eliminate charges for unused capacity and waste, but, even so, an arbitrary element remains. Alternative methods of allocating expenses of gen eral bank overhead and support de partments (such as the mail room, per sonnel department and employees’ cafeteria) can result in widely different cost estimates. For some bank services, these may constitute as much as 40-60% of total costs. Varying assumptions con cerning the likely impact of inflation on costs of performing services also can have a significant impact on prices. Differences in number of discrete ac tivities being costed can create varia tions in costs of specific services. In a complete study, all costs must be allo cated. Consequently, banks pricing fewer services would tend to have a higher price for those services. In the past, most banks have recognized that allocating costs in a multi-product firm First VISA Card to Governor G o v e rn o r Cliff Finch o f M is s is s ip p i (I.) received the first V I S A card issu ed in the state. M a k in g the p re sen tation is J. H. H ines, ch.. D ep osit G u a ra n t y N a t'l, Jackson . The b a n k h a s offered B a n k A m e ric a rd since 1968, a n d the V I S A card is B a n k A m e r ic a r d 's successor. The g o v e rn o r is the first o f m ore th a n 110 ,0 0 0 M is s is s ip p ia n s w h o w ill receive V I S A c a rd s a s their B a n k A m e ric a rd s expire. MID-CONTINENT BA N K ER fo r May 1 5 , 1 9 7 7 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis such as a bank is always somewhat ar bitrary, and they generally have prac ticed a policy of pricing bundled ser vices. Under this approach, costs of all services are spread among a relatively small number of activities. Customers are implicitly charged for non-costed services whenever they use one for which charges have been established. Customers using uncosted services with above-average frequency would tend to benefit from this approach, while those with below-average frequencies would lose. The base on which charges áre com puted can influence the cost. Credit and loan handling expenses provide an example. Once the total or direct costs of the loan section have been obtained, a variety of methods can be used to al locate these costs to borrowers. One possibility would be to determine the average cost per note or per renewal. This approach, however, could place an unduly heavy charge against the small borrower whose loan application is relatively straightforward and simple to process. Alternatively, costs could be allocated in proportion to number of dollars borrowed. This method, though, could result in overstating costs associated with large loans, since pro cessing time normally does not increase proportionately with the size of loans. Another approach would be to ex press all costs as a function of available man-hours. If a loan officer were to maintain accurate records of the time spent on each note, the hourly charge then could be allocated to the custom er. This approach, unfortunately, could result in higher charges for customers assigned to less-efficient loan officers. While the latter method probably is subject to the least distortion, each of the alternatives can be biased. As a re sult, some banks use combinations of the possibilities to charge for loan han dling and processing expenses. Alternative policies as to who should be charged for a service also can lead to price differentials. For instance, vir tually all banks make a charge in the account analysis to depositors for items deposited. However, in some sections of the country, utilities, such as the telephone company, have begun to en code and fine-sort items to banks. Only “on us” items are presented to each bank. Under these circumstances, the utilities have approached the banks with the argument that the processing charge for these items should be allo cated to check writers, rather than to depositors. In effect, they argue that a bank is simply carrying out the wishes of its customers when it pays the checks. Some banks, moreover, have agreed with this approach and waive any 63 compensating-balance requirements for such items deposited. While this may be an exceptional example, the argu ment can be readily extended to other bank services. In a program involving the direct deposit of wages, for exam ple, should the charge be levied on the recipient of the funds or the institution making payment? Might both be charged? On balance, therefore, estimated costs and prices of a service will tend to vary with types of costs computed, methods of handling indirect costs, overhead and desired profit, number of activities costed, the base on which charges are computed and distribution of charges among payors. For the last six years, the Kansas City Fed has conducted a survey of major banks throughout the country to obtain representative charges and col lected compensating-balance require ments for standard activity services. Not unexpectedly, one of the most out standing features of these surveys has been the wide differences that exist among banks in charges for standard services. In 1976, for example, among survey banks the maximum collected balance requirement exceeded the min imum by a margin of five times for non-encoded items deposited, 10 times for encoded items deposited, 109 times One of the world's few grand hotels has opened in Beverlg Hills L'ERMITAGE hôtel d e grande classe N a tio n w id e toll fre e Call (800) 421-0460 C a lifo rn ia toll fre e Call (800) 252-0464 64 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis for handling payable through drafts and 149 times for returned items. It would be a mistake to anticipate that all banks ever would have identi cal charges since the costs and actual services rendered often differ signifi cantly among banks. Nevertheless, dif ferences of such magnitudes tend to suggest that the methods of establish ing charges often are somewhat arbi trary. Moreover, as long as such differ ences exist, customers are likely to be somewhat skeptical about the figures. Aside from the obvious problem of arbitrariness, a number of refinements in pricing activity services should be considered. These can take the form of attempting to differentiate to a greater extent for the costs of servicing different types of customers, to expand the number of services in analysis state ments and to give greater consideration to types of costs used in the analysis. Costs of all transactions for a given service are not identical, but few banks have attempted to base prices on cir cumstances. While most banks, for ex ample, differentiate between clearing encoded and non-encoded checks, the method by which a check is cleared also can be important. Items that arrive pre-sorted are cheaper to process. Vir tually no additional cost is incurred if checks are sent to local Fed banks for collection. However, if checks are cleared through correspondents, both the transportation charges to the corre spondents and the required compensat ing balances should be added to the clearing costs. Most banks use the same set of charges to analyze accounts of corpo rate customers and respondent banks, but a moment’s reflection will indicate that the cost of providing services to each is not necessarily identical. Few correspondent customers, for example, make regular use of the teller lobby. Similarly, branch banks have occasion ally found that costs of transactions are different at alternative locations. The degree to which banks should differen tiate prices of services must be tem pered with practicality, but failure to recognize such differences destroys some of the usefulness of the figures. From an economist’s viewpoint, one of the more perplexing problems in cost accounting is the type of costs that should be used in analyzing for prof itability. Virtually all banks have devel oped prices based on average total historical or standard costs of services. Should correspondent customers, how ever, be expected to pay for such items as floor space occupied by the corre spondent department in a high-rent district of an inner city, a community room, cost of maintaining an expensive officer’s dining room, the president’s salary, advertising and matchbook ex penses, guards to police the lobby, etc.? If the bank were to go out of the cor respondent business altogether, most of these costs would continue. On the other hand, in pricing a direct-payrolldeposit service, should the price be based on the relatively low marginal cost or the relatively high average cost per transaction? Should the prices es tablished include an allowance for profit? When “on us” checks are de posited, should the price be paid by the depositor or by the check writer? No simple answers to these questions exist, but alternative approaches can lead to widely different judgments con cerning profitability. In any event, banks deciding to offer a new service or discontinue an existing one should base the decision on their ability to cover variable costs rather than an ar bitrary estimate of total costs. In the long run, all charges must be sufficient to cover total costs of operations, but in the short run, profits will rise as long as revenue exceeds average variable or direct costs. A frequent complaint one hears is that competing banks often don’t know their costs and tend to establish un realistically low charges. To cast some light on the validity of these accusa tions, the 1976 survey obtained the es- MID-CONTINENT BA N K ER fo r May 1 5 , 1 9 7 7 M anufacturers Hanover Com m ercial Corporation. A Capital Source few Correspondents. If you're a Manufacturers Hanover correspondent and you've been forced to turn away or lose lucrative receivables financing business, we have a plan that can enable you to compete in this highly specialized area. Use Manufacturers Hanover Commercial C or poration as your commercial financing arm. With M HCC, you can participate up to 50% in all referrals as well as retain checking accounts and other peripheral business. You'll be able to assist in mergers, acquisitions, buy-outs and spin-offs. And M H CC can also help you with difficult to handle loans, i.e., no clean-ups, highly leveraged situations or those with high peak seasonal needs. Manufacturers Hanover Commercial Corporation requires no compensating balances and you won't have to worry about exceeding your loan limits, or about your customers using competitor's services. W ere already a capital source for a number of correspondents, and we'd be glad to talk to you about becoming yours. For more information contact your National Division representative or write to us at the address below. We'll have some capital ideas for you. MANUFACTURERS HANOVER COMMERCIAL CORPORATION It’s a capital source. Headquarters: 1211 Avenue of the Americas, New York, N. Y. 10036 Contact: Merwin Wallace, VP. (212) 575-7472 or F.X. Basile, Sr. V.P. (212 ) 575-7444 Service Offices: 445 South Figueroa Street Los Angeles, Calif. 90017 Contact: Jim Morrison, V.P. (213) 489-4910 Jefferson First Union Plaza, Suite 1450 Charlotte, N.C. 28282 Contact: Michael Walker, V.P. (704) 332-2689 5775-B Glenridge Drive, N.E., Suite 340, Atlanta, Ga. 30328 Contact: William Wilmot, V.P (404) 255-5612 MID-CONTINENT BANKER for May 15, 1977 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 65 timated costs of performing certain services from a group of banks that recently had re-costed services. Using a cost-price comparison, the survey found that 52% of the banks had losses on ledger entry credits, 16% on ledger entry debits, 44% on encoded items de posited, 51% on non-encoded items de posited, etc. While these percentages must be viewed circumspectly since the sample of banks providing cost figures was small, they do suggest that a significant proportion of major banks are provid ing at least some services at prices be low estimated costs. Banks experienc ing losses on services often had lower prices than those that found the ser vices profitable; but more interestingly, loss banks almost always had higher estimates of costs than other banks. Whether these cost differences are at tributable to alternative methods of computing costs or reflect actual differ ences in efficiencies or variations in the nature of services performed can not be readily ascertained. ". . . costs of the service. On the demand side, consideration must be given to what a price will buy. If the price of a service also entitles the user to a bundle of other services, then compari sons among banks based only on prices may be misleading. It actually may be cheaper to acquire services from a bank that has higher prices if that bank has priced fewer services. In conclusion, I would like to com ment briefly on problems the Fed has been having with the pricing of ser vices. As bankers may be aware, for some time thrift institutions actively have sought to offer customers a full range of third-party-payment services. In addition, they have asked for direct access to some Fed services. Particular emphasis has been placed on the Fed’s ACH services, although check-collec tion operations also have received at tention. The thrift institutions appear to fear that without direct access they will be unable to be fully competitive with banks in offering payments ser vices. W h e th e r b a n k s a r e o n th e d e m a n d o r s u p p ly s id e , p ric e s a n d costs a r e n o t a l w a y s w h a t t h e y m a y s e e m . M e t h o d s o f c o m p u tin g a n d a llo c a t in g costs c a n d if f e r w i d e l y a m o n g in s titu tio n s , e v e n f o r r e la t iv e l y c o m p a r a b le s e rv ic e s In any event, for a variety of reasons the figures do not necessarily imply that banks appearing to experience losses on some services would find the provision of those services to be un profitable. Some may have deliberately established loss leaders. Others could recover potential losses by granting low earnings allowances, by establishing deductions for reserves that exceed average requirements, by making funds available for items deposited sometime after they have actually been collected or by establishing high prices for other services. In any event, one point needs to be stressed. Whether banks are on the de mand or supply side, prices and costs are not always what they may seem. Methods of computing and allocating costs can differ widely among institu tions, even for relatively comparable services. While greater uniformity in banks’ pricing practices would facili tate comparisons, survey results from the last few years have not suggested that this is occurring. If institutions supplying services are to make intelli gent decisions about the profitability of the services and customer relation ships, it’s necessary not only for them to know the price and estimated total cost of a service, but also the direct 66 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Moreover, they have argued that re quiring transactions for their customers to “pass through” commercial banks will raise their costs needlessly and could cause delays in receipt of pay ments information. On several occasions during the last year and a half, the Justice Department has issued statements strongly support ing the thrift industry’s petitions. In effect, Justice has stated that the Fed must offer thrifts nondiscriminatory ac cess to its ACHs. Justice has further argued that the Fed should price its payment services, thus preserving an opportunity for the private sector to compete with and improve on any ser vices offered by the Fed. In January, 1976, the Fed’s Board of Governors issued an interim-access proposal that generally broadened the eligibility of thrift institutions to make use of the Fed’s automated clearing houses. At the same time, the board announced that prices should be insti tuted for check-collection and ACH services, with the pricing schedule making allowance for the burden of member bank reserves. Since that time, a number of committees throughout the Federal Reserve System have actively been considering optimal access and pricing policies. Despite these efforts, to date agreement has not been reached because of the difficulty and costs involved in reconciling a number of seemingly inconsistent objectives. In large measure, the disagreements cen ter around issues of Fed membership, the impact of pricing and open access on the correspondent banking system, methods of deriving prices and the po litical consequences that could arise both for banks and the Fed from any policy change. Numerous questions are unanswered. For a moment, put yourself in the position of the Fed and consider how the Fed could grant open access to payments services without seriously re ducing the incentive for membership. It takes only a few simple calculations to show that many member banks would, under any reasonable pricing schedule, find the outright purchase of services considerably cheaper than the opportunity cost incurred in losing in terest on reserves at Fed banks. If pric ing is to be implemented, what should be done to improve the attractiveness of membership? Lower reserve require ments substantially? Allow member banks to hold a certain portion of re quired reserves in interest-bearing se curities? If either of these options were to be adopted, what would prevent states from reciprocating for nonmembers, thus leaving the relative position of both groups unchanged? Could the level of services be ex panded sufficiently to make member ship attractive? One possibility might be implementation of a basic borrow ing right at the discount window. On the other hand, if the Fed were to pay interest on reserves, what would be the reaction of Congress when Fed pay ments to the Treasury were reduced? Would such actions accelerate the pay ment of interest on demand deposits? Similarly, if expanded access were granted nonmember institutions to the Fed’s check-clearing and ACH opera tions, what should be done so that the impact would not be seriously disrup tive to correspondent banks and to the Fed’s operations? With the prices of standard services varying so markedly among correspondents, how can the Fed be sure of the effect its actions will have? If prices are to be established, how should they be derived? Should prices of ACH transactions be based on cur rent costs, which are relatively high, or should they be based on estimated long-run average costs, which are rela tively low? Should the system attempt to subsidize ACH costs in an effort to encourage the movement toward a more efficient payments mechanism? If so, what should be done to ensure that MID-CONTINENT BANKER for May 15, 1977 Rally 'round the men from May 1-3— Nebraska Bankers Convention, Omaha— P. V. M ille r, Jr., Fred N. Coulson, Jr., Tom C. Cannon, Edwin B. Lewis May 8 -1 0— Texas Bankers Convention, Dallas— P. V. M iller, Jr., Fred N. Coulson, Jr.,; Visit the midwest's most experienced correspondents at your state convention. Tom C. Cannon, John M. McGee May 10-12— Oklahoma Bankers Convention, Tulsa— P. V. M ille r, )r., Fred N. Coulson, Jr., & igj j Tom C. Cannon, H. C. Bauman May 11-13— Kansas Bankers Convention, Overland Park— P. V. M ille r, Jr., Fred N. Coulson, Jr., John C. Messina, H. C. Bauman, Frampton T. Rowland, Jr., Michael Brixey May 8 -10— Missouri Bankers Convention, Kansas City — James M. Kemper, Jr., P. V. M iller, Jr., Fred N. Coulson, Jr., Thomas J. Brown, John C. Messina, George W. Porter June 1-5— Colorado Bankers Convention, Colorado lUv •JJJI Springs 11 — IFred I vivi lN. ’t • Coulson, vi I j v l i f ß Jr., I «f Tom C. Cannon, John M. McGee June 9-11— New Mexico Bankers Convention, Santa Fe— Fred N. Coulson, Jr., Tom C. Cannon, John M. McGee MID-CONTINENT BANKER for Mar 15. 1977 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis of Kansas City™ 10th & Walnut Phone AC 816-234-2000 Member FDIC private automated clearinghouses are able to survive and compete? Should the prices include an allowance for profits and indirect costs? If such al lowances were not included, it could be difficult for correspondent banks to offer effective competition. On the other hand, there are strong feelings in the system that it would be inappropriate for the Fed to seek to make a profit on its services. Moreover, because volume has been slow to rise, at least one automated clearinghouse is contemplating making payments to originators of transactions. Should the Fed’s prices be uniform nationally or should they vary by Fed district? These questions only begin to scratch the surface, but they demon strate that there are no simple answers. The questions, however, demand solu tions. I hope that bankers will play an active and leading role in seeking a solution that’s fair and equitable for all concerned. • • Regulating Pressures (C o n tin u e d fro m page 28 ) with changing the corporation income tax in other ways to improve the at tractiveness of equity finance, it would make equity expansion more feasible for banks. Other proposals that have been sug gested for years— and that might de serve a new look—are deposit-insurance premiums that are higher for banks with low capital ratios and supple mentary reserve requirements on purchased-money liabilities—or all liabil ities— that exceed some multiple of the bank’s capital base. Indeed, graduated reserves beyond a specific level of purchased-money ratios to gross loans or short maturity assets might be a way of achieving some control over flagrant abuses. While I’m not convinced that any of these steps would, on balance, be the best action, they probably would work in the right direction. I n h ib itin g R egulators’ C o rre ctive M oves. Another aspect of the pur- chased-money expansion that troubles me is its potential for inhibiting neces sary moves by regulators in the case of individual problem situations. In such cases, regulators considering a ceaseand-desist order, a denial of a holding company acquisition on financial or managerial grounds or some other reg ulatory move that will become public must always weigh the benefit of the move against the possibility that public knowledge of the move will compro mise public confidence and may gen erate a run on the bank’s liabilities. 68 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis The more volatile a bank’s liabilities and the greater the proportion that are not covered by deposit insurance, the greater the danger of a run causing rapid deterioration of a bank’s liability base. Obviously, purchased-money ob ligations are substantially more vulner able to this problem than regular de posits. It troubles me that the heavy reliance on purchased money in a num ber of banks not only may create severe financial stresses for some of them, but also may make it difficult for regulators to step in when necessary. So once more I am in the dilemma of weighing benefits and costs, for this is certainly a cost of some magnitude. Should more restrictions be put on use of purchased money for this reason? There are other ways of attacking this dilemma, each with its own prob lems. For example, extend deposit in surance to all large CDs or to all de posits. Then, even a troubled bank should be able to turn over its CDs when they mature. But this surely would require some restructuring of the schedule of insur ance premiums, which currently are based on total deposits rather than in sured deposits. Extending insurance to all deposits, including large CDs, with out a change in the premium structure would convey a benefit to large banks at the expense of their smaller com petitors, since large banks are propor tionately more active issuers of large CDs. To preserve the present balance among banks, it would be necessary to charge a higher or supplemental insur ance premium on large deposits. Full deposit insurance also would have the disadvantage of removing an important source of market discipline on banks since large depositors no longer would have to scrutinize their banks’ soundness when deciding where to place their funds. More broadly speaking, the problem posed by the threat of rapid withdrawal of purchased-money obligations arises only because a bank’s assets are not equally liquid. Thus, the seriousness of this problem can vary widely from bank to bank depending on the turn over rate of each bank’s loans and quantity of marketable investments it holds. If each bank employing large quantities of purchased-money obliga tions used these funds to acquire very liquid investments, then the purchased money would not pose any liquidity threat. This is unrealistic, of course. But it brings out the point that part of the difficulty with purchased money is not its high cost but its short maturity and the fact that its use tends to aggravate the maturity imbalance between a bank’s assets and its liabilities. To a considerable degree, banks are en gaged in borrowing short and lending long, especially in terms of the turn over and liquidity of their funds, just as are nonbank thrift institutions. Ma turities on both sides of the balance sheet are shorter for banks, but the im balance is similar, and purchased mon ey can make the imbalance worse. Where am I leading with this? I am looking for some way to portray in broad terms the web of difficulties that the purchased-money explosion creates for regulators, and the question in my mind is whether there may be some possibility of dealing with these diffi culties as an issue of portfolio balance, considering assets and liabilities to gether. If one takes this approach, a couple of crude possibilities suggest them selves. One possibility would be de posit insurance premiums that vary with the degree of maturity imbalance between a bank’s assets and liabilities. Another would be to limit purchasedmoney obligations to some multiple of a bank’s cash and marketable secur ities, call loans and other liquid assets. Also of some relevance in this context are moves to encourage the lengthen ing of other liabilities. The 1973 in crease in rate ceilings on small con sumer CDs with maturities in excess of 2/2 years has had just this effect. Such small-denomination consumer CDs in creased from 3 % of total commercial bank deposits in mid-1973 to 9% in mid-1976. Also, access to the Federal Reserve discount window may mod erate the impact of a withdrawal of such money. Where does all this leave us? With a series of tough questions to ponder about what have been the benefits and costs of recent banking regulatory and competitive changes; with a sense that the regulatory structure is constantly evolving and constantly in need of reevaluation. Each new change in reg ulations creates another round of diffi cult issues. This analysis obviously argues for great caution in making important reg ulatory changes or in imposing further competitive pressures. While some ad vantages and disadvantages of each move are readily apparent, others, par ticularly at the individual bank or de positor level, are not clearly discern ible. Over the next months and per haps years, we will be trying to de termine the balance of costs and bene fits of a number of potential new changes. Among those proposed are payment of interest on demand de posits or nationwide NOW accounts, extension of reserve requirements on all transaction balances and payment of interest on reserve balances, renewal or abolition of ceilings on interest rates on time and savings accounts, removal of the differential on rates authorized for thrifts against banks and extending MID-CONTINENT BANKER for May 15, 1977 DANK DESIGN FOR BANKERS . . . FUNCTIONAL, UNIQUE AND COST-EFFECTIVE. MUTE O R CALL COLLECT FOR INFORMATION. THE PLUS GROUP 10756 Indion Head Blvd. Sf. Louis, Mo. $3132 1-314-426-2244 MID-CONTINENT BANKER for May 15, 1977 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis THE PLUS GROUP 69 checking-account powers and new lend ing authority to thrifts and credit un ions. Extraordinary care will be required to measure the impact of a package of changes and the timing of such moves. Also important will be the need for measurement of public and institu tional reactions. Our complex financial structure, with its interrelationships, checks and balances of power and spe cial management expertise, could be upset by hasty or sweeping reforms.' Just one example might demonstrate the complexities. Were there nation wide NOW accounts on which finan cial organizations held required re serves that earned interest, there could develop new instabilities in competitive positions or cost and price uncertainties in relationships between thrifts and banks, between correspondent banks and the Federal Reserve and between customers of one institution against those of another. On the other hand, there are potential benefits to this formulation of change including the competitive thrust in financial organi zations, increased equity of interest pay ments among differing groups of de positors and to the equity between member and nonmember banks. The balance between potential costs and benefits will require careful analysis and appraisal. Finally, this review highlights the fact that there are both conflict and complementarity in the relationship be Proposed Legislation Would Result In Weakened Local Economies-ABA LEG ISL A TIV E proposal that has the intent of strengthening local A economies would have the opposite ef fect, an ABA spokesman has told the Senate Banking Committee. In his testimony to the committee, ABA President-Elect A. A. Milligan, president, Bank of A. Levy, Oxnard, Calif., said that the Community Re investment Act is a “major step toward political allocation of credit. It is a step toward specifying the kind and amount of loans to be made by financial insti tutions. It would substitute the judg ment of a federal agency as to what constitutes a legitimate credit need in place of the judgment of borrowers and financial institutions.” The act would require an applicant for a financial institution charter, insur ance, branch (including an electronic terminal), HC acquisition, merger or home or branch office relocation to sup ply federal regulators with information concerning the institution’s past record and future intent regarding meeting its community’s credit needs. The bill also would require regulators to use that information in considering such appli cations and to permit community, con sumer and other groups to testify at public hearings as to the financial in stitution’s record on meeting local credit needs. In speaking for the ABA before the Senate committee, Mr. Milligan said that bankers could not support the pro posal because it implies that a bank should lend to borrowers in its deposit gathering area in some direct propor tion to the amount of funds it gathers in that area. “Any attempt to require banks to meet that criterion would seriously un dermine the banking system’s ability to meet this nation’s financial needs,” the ABA president-elect said. “It would guarantee that communities now suffer tween regulation and forces of market discipline. In spite of its importance in achieving improved efficiency, releas ing the full forces of market discipline on a regulated industry can cause se rious difficulties and can be overdone. There always is a need to measure and balance the benefits of increased com petition against the enlarged costs and exposure to the banking system and in dividual banks. On the other hand, if a fundamental decision is made to bring greater com petition into a regulated industry, it is often possible to shape new regulations so as to channel and direct the com petitive forces in ways that will best serve the public without entailing costs greater than the expected benefits. • • ing from economic deterioration would be unable to generate sufficient funds to finance their own economic redevel opment.” As an example of the bill’s potential effect, Mr. Milligan pointed to the credit needs of farmers in California’s San Joaquin Valley. “At times (these farmers’) credit needs may be several times the total value of banks located in Valley communities. The only way those banks can meet those credit needs is to draw on deposits at bank offices located outside the Valley. Yet, under this bill, bank offices outside the Valley would not be considered to be meeting the credit needs of their own communities.” Mr. Milligan also described to the Senate committee similar situations in the Wisconsin area, concluding, “The Community Reinvestment Act would not reverse the economic and resultant physical deterioration of the communi ties it is intended to help. In instances where the credit needs of a deposit service area exceeded its total deposits, as is the case in many urban communi ties, the bill would make it more diffi cult to finance urban redevelopment.” C u m b e r l a n d S e c u r it ie s C o m p a n y , I n c . Underwriters and Distributors of TENNESSEE AND SOUTHERN MUNICIPAL BONDS And , In dustrial R even u e H ospital R even u e and Leased H ousing R even u e B onds Suite 1 5 1 4 Hamilton Building 615-637-1131 Knoxville, Tennessee 70 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis MID-CONTINENT BANKER for May 15, 1977 the bank publication for farm customers • Serious answers to difficult financing questions facing your customers • 8 pages published quarterly in full color • Personalized to your bank’s image Recent topics: Credit lines: what are the danger signals? Land values, ownership and financing Planning your financial statement I.R.A. - H.R. 10 programs Estate Tax reform Hog facilities - what do they cost? Farm Finance c/o NORTHWESTERN BANKER 306 - 15th Street Des Moines, Iowa 50309 515/244-8163 Tax planning in 1976 At no obligation, please send a sample copy with prices and an order form. Your farm customer is important. Lef him know it! Name______________________________________ Bank_______________________________________ Address City____ State. Zip. The spring issue is now available to order. MID-CONTINENT BANKER for May 15, 1977 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 71 Commercial of Little Rock's National Advisory Board Tells Arkansas How to Profit From Shift to Sun Belt OW ARKANSAS can take advan tage of the current emphasis on the so-called Sun Belt section of the U. S. is pinpointed in the sixth annual report of Commercial National of Little Rock’s national advisory board. The re port discusses the state’s outstanding advantages and its position in the Sun Belt of the southern rim of states that is gaining dramatically in population, industry and economic growth. The latest report is the result of studies made by the 17-member board at its annual meeting last October 29 at Commercial National. The final draft of the report, “The Power Shift, Arkansas’ Opportunity,” was completed at that time and, after minor revisions, now is in printed form. The report outlines and suggests ways to attract Arkansas’ share of the southward movement and offers the ex pertise of the board’s membership to the task of taking the state’s advantage into the marketplace, where it can be come better known. The report takes its title from a book by Kirkpatrick Sale called “Power Shift.” Published in 1975, the book de scribes the South’s emerging economic power as a great flow of wealth moves from the Northeast and Midwest to the fast-growing southern and western re gions of the country. The report traces the shift of corporate headquarters of major corporations from northern cities to large metropolitan areas of the South and West which, in essence, be comes Arkansas’ opportunity. The report opens with a quotation H from a speech by former Commerce Secretary Elliot Richardson to the Southern Growth Policies Board in 1976: “Today, we see one-third of a nation transmuted from the country’s No. 1 economic problem into the na tion’s No. 1 economic leader.” The report also outlines transporta tion available to corporate headquarters relocating in Arkansas as well as the tremendous advantages of the Ozarks, the Ouchitas and the state’s abundance of lakes and streams that impress new comers as attractions for business firms, the added population they bring with them and the economic growth that can follow. The bank’s national advisory board is comprised of 17 native Arkansans who have become nationally and inter nationally known in business, industry, education and religion through their executive responsibilities and t h e i r leadership. The report has been made into a brochure, which has been published by Commercial National and is being distributed to members of the legis lature, state and federal officials and government agencies. The Arkansas In dustrial Development Commission will include the report in its industry-pro curement program. Copies also are be ing distributed to libraries, institutions of higher education and other agencies to place among their permanent rec ords. The brochure is available to all interested persons. Letters requesting free copies should be sent to William Bowen, bank president. It was Mr. Bowen who organized the national advisory board in 1971, and it’s believed to be the only one of its kind in the country. Members are: James S. McDonnell, chairman, McDonnell-Douglas Corp., St. Louis; Sid ney A. McKnight, president, Montgom ery Ward & Co., Chicago; Kemmons Wilson, chairman, Holiday Inns, Inc., Memphis; W. Carroll Bumpers, presi dent, Greyhound Leasing & Financial Corp., Phoenix; James E. Davis, chair man, Winn-Dixie Stores, Inc., Jackson ville, Fla.; H. L. Hembree, chairman, Arkansas Best Corp., Fort Smith; C. M. Kittrell, executive vice president, Phil lips Petroleum Co., Bartlesville, Okla.; William Seawell, chairman, Pan Ameri can World Airways, Inc., New York City; George Stinson, chairman and president, National Steel Corp., Pitts burgh; Robert E. L. Wilson III, Lee Wilson & Co., Wilson, Ark.; Fred M. Pickens, attorney and chairman emeri tus, board of trustees, University of Arkansas, Newport; John G. Phillips, chairman and CEO, Louisiana Land & Exploration Co., New Orleans; Frank Pace Jr., president, International Ex ecutive Service Corps., New York City; Henry H. Henley Jr., president, Cluett, Peabody & Co., Inc., New York City; Neil E. Harlan, senior vice president, Foremost-McKesson, Inc., San Fran cisco; Charles H. Murphy Jr., chairman, Murphy Oil Corp., El Dorado, Ark.; and the Right Reverend John Maury Allin, presiding bishop, E p i s c o p a l Church, New York City. * * ATMs by IBM now are able to dispense American Express Travelers cheques. Procedure for obtaining cheques is similar to normal ATM transaction. ATM transaction. The customer then presses a button labeled “American Ex press—Travelers Cheque” and keys in the value of travelers cheques desired. Cheques then are dispensed by the machine. As in other ATM transactions, the machine directs the bank’s computer to deduct the purchase and fee from the customer’s checking, savings or loan ac count. Travelers cheques sold through ATMs will be accompanied by a small pam phlet reminding the purchaser to sign the cheques immediately. The pam phlet also gives information on replac ing lost or stolen cheques and provides space for recording serial numbers and where and when the travelers cheques were spent. Travelers Cheques Issued By Automated Tellers In Less Than One Minute N EW YORK CITY—IBM ’s self-ser vice banking machines have added a new service: issuance of American Ex press Travelers cheques. According to an American Express spokesman, the procedure will be com pleted in less than one minute, 24 hours a day, seven days a week. To purchase travelers cheques through the ATM, a customer inserts a bank identification card into the machine and enters the same account information needed to initiate any other 72 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis MID-CONTINENT BANKER for May 15, 1977 What’s m ost im portant in a correspondent relationship? Q uality When you evaluate a corre spondent bank, you look not only for specialized financial and operational expertise, but also for a high quality of service. That’s why throughout the country, bankers rely on The Northern Trust Bank. We offer a complete range of advanced banking programs, supported by a tradition of excellence that is unsurpassed. How can we serve you? At The Northern Trust, all correspondent services are designed with your needs in mind. And these services are constantly being improved to keep pace with the latest technology and regulations. A ccelerated D eposit C ollection. To help your bank have more cash on hand, The Northern Trust accepts unsorted cash letters, offers late deadlines, and provides immediate availability on major financial centers throughout the country. B ond and M oney M arket Services. You have complete, accurate market information with j ust one phone call. FOCUS.™ Your bank’s trust investment officers have daily access to the research that our own portfolio managers use, weekly reports that can reduce their paperwork, and periodic seminars with top Northern Trust officers. Special Project A ssistance. When you need help with operations analysis, float reduction, marketing, or other important projects, your Northern Trust calling officer and staff are available to assist you. They will put you in contact with other banking specialists who provide information and perspective for your special assignments. For a quality of corre spondent service that’s rare in banking today, contact the calling officer for your area at The Northern Trust Bank, 50 South La Salle Street, Chicago, Illinois 60675. Telephone (312) 630-6000. The Northern Trust Bank Bring your financial future to us. MID-CONTINENT BANKER for May 15, 1977 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 73 Supervisory Changes (C o n tin u e d fro m page 2 4 ) All banking agencies are giving far greater attention to off-site analysis and monitoring to complement and support the on-site examination evaluation. These systems, often referred to as “early-warning systems,” employ the tools of the financial analyst, utilizing trend analysis and peer-group compari sons. With the growth, both in terms of size and speed, of financial transac tions, it seems inevitable that this com puter-based off-site monitoring and eval uation of individual bank performance will take on an increasingly greater role in bank supervisory agencies. Revised reports of examination, de signed to concisely and precisely com municate the agency’s evaluation of a bank’s performance, condition and fu ture outlook, are an important element of the change that is ongoing. Not only will this new report presentation give management a clearer and more forth right understanding of the examination YO U CAN SEE T H E WORLD IN 40 DAYS By Leland T. Waggoner SEE THE WORLD IN 40 DAYS? Sure, not just around it but really see it. Read how one busy executive like you, a senior vice president of Home Life Insurance Company, did what you can do— meet monks in Khatmandu, drug smugglers in Kyber Pass, belly dancers in the Middle East, on a trip without ruinous expenses which not only circles the globe but criss-crosses it too. YOU CAN SEE THE WORLD IN 40 DAYS by Leland T. Waggoner also gives you complete information on charter flights— OTC, ITC, TGC— and the "new” ABC approved by the CAB. This also makes the perfect gift book for the experienced, novice, or even armchair traveler. Illustrated with color photographs, 240 pages, 6" x 9" Commerce Publishing Co. 4 0 8 Olive Street St. Louis, MO 6 3 1 0 2 team’s conclusions, it also will be a report of far greater value to the out side directors, who, typically, are not professional bankers. Recent experience has demonstrated the importance of as suring that directors are adequately in formed. It’s the hope of the supervisory agen cies that the more modern and profes sional approach to examination and evaluation— an approach more in har mony with the good manager’s “bottomline” view—will produce the basis for more constructive discussions with bank managements. There will, of course, be those cases where professional dis course does not produce the desired re sults. In these cases, there is every rea son to expect that the federal banking agencies will have no hesitancy in re sorting to the authorized formal pro cedures of enforcement, including cease-and-desist orders. In recent years, there’s been increased utilization of formal enforcement procedures, where management was found insensitive to the need for corrective action or in competent to chart and administer a program for improvement. As all in the business of banking know, the nature of the business con tinues to undergo change. Partly, this is attributable to new financing needs in our economy; partly, it’s due to the application of new technology to the delivery of traditional banking services. Most of this change occurs gradually, granting sufficient time for adjustment. Similarly, we can expect important changes to take place in regulation and supervision. Change in regulation will produce a more competitive climate for banking and other financial-service in stitutions. Changes in supervisory prac tice will produce a better analytical product. Supervisory agencies will be more attentive to assuring effective management performance. Rut as with the industry’s changes, changes in regu lation and supervision also will occur with a certain gradualness, and those inclined to adapt will have the time to adapt. * * MCB Please send m e ............copy(s) of AROUND TH E W O RLD IN 40 DAYS by Leland T. Waggoner at $9.30 per copy. I enclose the payment.* Name .................................................................................................................................... Address ............................................................................................................................... City/State ..................................................................................... Zip .......................... * The above price represents a 15% discount to readers of this publication. 74 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis ■ RICHARD I. W ITH ERO W has joined Commerce Rank, Kansas City, as an assistant vice president in the national division. He was formerly with Union Commerce, Cleveland. John W. Tucker, president and CEO, R. B. Jones Corp., has been elected to the bank’s board. John F. Guettler Jr. has been appointed an assistant vice presi dent at Commerce Bancshares. He joined the HC in 1973 and is assistant director of personnel. MID-CONTINENT BANKER for May 15, 1977 (Every Director Should Have a Copy!) The Bank Director’s World. $6.25 The Bank f “(Many) directors are unable to adopt (an) easy solution to the conflicts dilemma. They must recognize that conflicts of in terest always have and always will exist in bank boards . . . the board obviously can’t have each director resign whenever a conflict . . . presents itself. Rather, the tors a tO P WOMEN: the “Forgotten” Directors. W OMEN: The “Forgotten ” Directors • r\ r* H FOR THE / / / / B A NK DIRECTOR / $5.25 jr. H I / T R U ST G U ID E // / Could be most helpful to banks contem plating the election of a woman or women to the board. Survey results from women directors across the country show how they view their relationships to other di rectors of their banks, what they feel are A Trust Guide for the Bank Director. Wm / / / ■A $2.50 3 Behind Boardroom Doors Since introduction of the Keogh Act (H.R.10), many small firms and self-em ployed individuals have established pen sion trusts, so the number of banks adding trust functions has increased substantially. Directors of banks with new trust depart ments or newly elected directors of banks Behind Board Room Doors. $6.00 Dr. Lewis E . Davids, Editor, The BANK BOARD Letter, provides insights to fine points of bank board membership. Sam ple chapter topics: CEO selection, reim bursement; management audits; finding customers; board minutes; director fees, retainers. Typical paragraph: “The chair man . . . receiving an examination report, Quantity Prices Listed Below board should . . . police itself (and) openly discuss factors involving conflicts.” That quote illustrates one of many overlooked points of bank board membership that are examined in this book by Dr. Lewis E . Davids, Editor, The BANK BOARD L et ter. Director relationships with the HC, CPAs, legal counsel, stockholders, corre spondents and advisory boards are cov ered. Includes models, exhibits. their relationships to men and women staff members of the institution, frustra tions and delights encountered in board service and what they see as today’s ma jor banking problems. By A. Ruth Davids, Senior Research Associate, with Dr. Lewis E . Davids, Editor, The BANK BOARD Letter. with established trust functions often aren’t fully conversant with direction of trust activities. They will find this book, by Dr. Lewis E . Davids, Editor, The BANK BOARD Letter, to be a valuable aid. It delineates trust department examinations, policies. Includes Comptroller’s Regulation 9, covering fiduciary powers of national banks, collective investment funds and dis closure of trust department assets. verbally briefs the board on its contents, not permitting each to . . . review it in its entirety. A top bank supervisor told me of an instance (where) a bank director demanded to see the report. He saw it, but only after the CEO had removed pages containing the examiner’s comments and conclusions and violations of law and regulations. Fortunately, the director had the foresight to note the missing page numbers.” The BANK BOARD Letter 408 Olive St., St. Louis, MO 63102 Please send us: ............ ............ ............ ............ copies, Bank Director’s World copies, Women: the “Forgotten” Directors copies, Trust Guide copies, Behind Board Room Doors Total Enclosed $ $ $ $ $ Bank Director's World WOMEN: the "Forgotten" Directors 2- 5 $6.00 ea. 11-25 $5.50 ea. 6-10 $5.75 ea. over 25 $5.25 ea 2- 5 $2.25 11-25 $1.85 6-10 $2.10 over 25 $1.75 Namë & T i t l e ...................................................................... Trust Guide For Bank Director Behind Board Room Doors Street 2- 5 $5.00 11-25 $4.65 6-10 $4.80 over 25 $4.75 2- 5 $5.25 ea. 11-25 $4.75 ea. 6-10 $5.00 ea. over 25 $4.50 ea MID-CONTINENT BANKER for May 15, 1977 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Bank ....................................................................................... .................................................................................... City, State, Zip ............................................................... (Please send check with order. In Missouri, add 4%% tax.) 75 From the Mid-Continent Area Alabama Em ployee o f the Y e ar Mary Lee Tucker (I.), loan teller, Farmers & Merchants Bank, Centre, receives the plaque naming her the bank's "Employee of the Year" from the institution's pres., Mary George Jor dan Waite. ■ F IR ST ALABAMA BANK, Mont gomery, has promoted Thomas J. Leach to senior vice president and Talmadge B. Cox to vice president and elected Marie P. Malinowski to assist ant women’s division officer. Mr. Leach, who heads the BankAmericard division, has been with the bank for 16 years. Mr. Cox joined First Alabama in 1968. Miss Malinowski has been with the bank 10 years. • JO E R. SIMS has been named vice president and auditor, First National, Russellville. He has 19 years’ banking experience. Illinois ■ DONALD L. HUNT has been ad vanced from vice president to president and CEO, First National, Marissa, suc ceeding Lyle W. Church. Mr. Church retired after spending more than 50 years at the bank. In other action, Daryl Heil, who was vice president and cashier, was named chairman; and Hazel Lathum advanced from assistant cashier to cashier and secretary to the board. ■ HARRIS BANK, Chicago, has elect ed Timothy K. Healy, Robert J. Barton and Emmon S. Rogers vice presidents. Genevieve M. Galla and Helmer J. Nelson were named assistant vice presi dents, Joan L. Mcllroy and William A. McNickle were named trust officers 76 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis and Kenneth J. Palm and Suzanne J. Pecora were named systems officers— all in the trust department. In the banking department, Dennis A. Cullen, Thomas A. Meador, Paul J. Much, Frank G. Slocumb, Timothy S. Vincent and Philip A. Washburn were named assistant vice presidents. In the opera tions department, James A. Grabsky, Gerald L. Nieukirk and William O. Schinagl were elected assistant vice presidents. Desmond A. MacRae was appointed assistant vice president in the New York office and Robert C. Beach was elected assistant vice presi dent in the building services depart ment. ■ RICHARD D. YANNEY has been named vice president, Bank of Yorktown, Lombard, and will have respon sibility for the bank’s commercial, in dustrial and real estate lending. He goes there from Sears Bank, Chicago, where he served as assistant vice presi dent, commercial banking division. ■ CONTINENTAL BANK, Chicago, has promoted Tom A. Rothschild to second vice president and named Thomas M. Klein residential loan coun sel in the personal banking department. In the trust and investment services department, new second vice presi dents are Albert E. Day, N. Bruce Cal low, Richard A. Powers, Albert V. Bear, John D. Brendel and Dennis M. Toolan. New trust department officers are John H. Hileman, operations offi cer; Craig A. Madsen, financial coun seling officer; Larry R. Denham and Thomas F . McGrath, investment offi cers; and Terry L. McRoberts, Robert C. Peiler and Evelyn B. Snyder, trust officers. Named second vice presidents in the operations and management ser vices department were Katherine D. Miller, Paul J. Belsky, Kenneth A. Koppit and Joseph M. Monticello. Named second vice presidents in the bond and money market services de partment were Theodore E. Bulow, John C. Gaylord and Rene D. Haw kins. Dale J. Cherry and Richard A. Daukus were named bond officers. In the commercial banking services de partment, George E. McDaniel Jr., John R. Grandstaff, Paul R. Jaudes, John E. Phillips, Albert L. Weiss and Bettina M. Whyte were named second vice presidents and Thomas H. Am brose was named commercial banking officer. New second vice president in the financial services department is Robert W. Pelka, and Paula J. Doldt and James L. Underwood were named financial services officers. In the inter national services department, Gail J. Loveman, Michael L. Morris and Jo seph A. Yuska Jr. were named second vice presidents. ■ C. LEONARD TREVIRANUS has been elected a security officer at Na tional Boulevard Bank, Chicago. He is expected to assume the post of director of security upon the retirement June 30th of the present director, John Kel ly. Mr. Treviranus is a former F B I special agent. Leland National Adopts Traditional Design Leland Nat'l has switched from a contemporary to a traditional architectural style in its building and will show its remodeled interior and exterior at a grand-opening celebration next month. Three new offices and a boardroom were incorporated in the design. The ceiling and interior lighting were replaced, and new carpeting, draperies and furniture (such as wing chairs) were installed. Extensive use was made of walnut moldings and brass hardware. Bank Con sultants of America, Rolling Meadows, III., designed and coordinated the project. MID-CONTINENT BANKER for May 15, 1977 ■ SM ITH TRU ST, Morrison, is pre paring for its second century of service by moving into a new building, located across the street from the brick build ing in which it began as Smith & Mc Kay Banking House in 1878. The new structure (pictured here) features dark, earth-tone brick with anodized bronze and redwood trim and a copper roof that will turn a soft green in a few years. The brick extends to the interior, blending with a quarry-tile lobby floor and rich earth tones of carpet and decor. Oak used in the woodwork and Department Stores. Richard A. Curry has joined the bank’s board. He is senior vice president-finance, Coleman Co. B. A. (Bill) Staats, vice president, has been recognized by the ABA as a certified commercial lender. ■ JIM SCHOEN has joined Twin Lakes State, Wichita, as vice president. He was formerly with First National, Wichita, and served 10 years as branch manager, Auco Financial Services. ■ R O BERT M. HYRE and Gregory K. Wilson have been named assistant cash iers at Kansas State, Wichita. They are in the installment loan and commercial loan divisions, respectively. named senior trust officer; and George Simonton, vice president, was named cashier. Ray McElveen, vice president, was appointed manager, Amite Office. ■ AUGUST PEREZ III has been elected to the boards of New Orleans Bancshares, Inc., and its principal sub sidiary, Bank of New Orleans. Mr. Perez is an architect. Mississippi Y o u n g Bankers Officers ■ STEPH EN R. PAGE has been named trust administrator at Merchants National, Topeka. He is a recent grad uate of Washburn Law School and is a former Army officer. open beams of the vaulted ceiling is complemented by natural light from an 88-foot-long skylight. Plants and trees are interspersed in groups in the lobby. Four historic Morrison land marks are pictured on “Heritage Wall paper” on the 40-foot-long tellers wall. A feature of the building is a commodi ty room with daily, up-to-date market and other pertinent information for agricultural customers. A ribbon-cut ting ceremony was held April 19, fol lowed by a public grand opening April 20-30, with gifts, tours, special prizes, displays and refreshments. Kansas ■ OVERLAND PARK STA TE plans to remodel its premises and incorporate much of an adjoining building, result ing in some 6,000 additional square feet of space. Both interior and exterior of the premises will be upgraded. The nearly eight-month project will affect the lobby, loan departments, customer service, bookkeeping and check process ing areas. The work is being done by the Bunce Corp., St. Louis. ■ ROGER N. JO N ES has joined Union National, Wichita, as assistant manager in the adjustments depart ment. He was formerly with Woolco Kentucky ■ ANNA S. W H ITE, assistant vice president, Citizens National, Bowling Green, retired recently, completing 21 years with the bank. She joined the bank in 1956. ■ DAVID E. BAKER has been pro moted to assistant cashier at First Se curity National, Lexington. He joined the bank in 1974. ■ RICHARD REAM ES has been named manager of Citizens Fidelity’s University Banking Center, Louisville. He joined the bank in 1973 and was formerly assistant manager, Medical Center Office. Louisiana ■ F IR S T GUARANTY BANK, Ham mond, has elected Duane Shafer secre tary, appointed Mrs. Lovinia Robertson recording secretary, named Parker Gabriel head of the banking group and Anil Patel head of the administration group. Lee Spence, vice president, was named executive trust officer; David M. Campbell, vice president, was These are the new officers of the Young Bank ers Section of the Mississippi Bankers Associa tion. L. to r., they are: pres., Glynn Hughes, pres., South Central Bank, Monticello and Silver Creek; v.p., Charles A. Jordan, v.p.. Delta Nat'l, Yazoo City; treas., Wallace McMillan, v.p., Peo ples Bank, Tupelo; and sec., James W. Craw ford, a.v.p., Deposit Guaranty Nat'l, Jackson. ■ DONALD E. SU TTER and T. W. Milner Jr. have been named chairman and vice chairman, respectively, at Hancock Bank, Gulfport. Their former titles were executive vice president and senior vice president, respectively. Three were elevated from vice presi dents to executive vice presidents: Walter C. Hinkle Jr., George A. Schloegel and Charles A. Webb Jr. C. E. Hutchins Jr. was promoted to senior vice president from vice presi dent. Joseph M. Gannon Jr. and Jerry Hartfield were promoted to assistant vice presidents and Thomas F . Bourdin was named advertising officer. New of ficers include Gordon E. Long, assistant auditor; Richard P. Moran, assistant branch officer; Gerald Gasper, assistant cashier, Bank of Picayune; Mrs. Martha B. Peterman and Mrs. Sue V. Robinson, UVe make automated bond accounting easier for you! Max Dickerson CNB COMMERCIAL NATIONAL BANK Don Barnes 6TH & MINNESOTA AVENUE • KANSAS CITY, KANSAS 66101 • 913 371-0035 • MEMBER F.D.I.C. MID-CONTINENT BANKER for May 15, 197 7 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 77 assistant cashiers; Mrs. Sherry H. For tenberry, John S. Hall, Sidney E. Rice Jr. and Sidney L. Rushing, assistant loan officers; and Grady L. Cobb and Mrs. Sadie N. Rodrick, assistant opera tions officers. Missouri ■ F IR S T NATIONAL, St. Louis, has promoted Donald C. Hartig, David L. Kirkland and Glennon J. Schultheis from assistant vice presidents to vice presidents. Earl N. Haldeman III, com mercial banking officer-agricultural fi nance, was made an assistant vice presi dent. Mr. Hartig, with the bank since 1968, is in the bond department, as is Mr. Schultheis, who joined First Na tional in 1960. Mr. Kirkland went to the bank in 1973 and is in the real estate and mortgage loan department, Mr. Haldeman joined the bank in 1976, going from First National, St. Joseph, where he was on the agricultural lend ing staff. Rancshares, Kansas City. Mr. Phelan formerly was with Landmark Bancshares Corp., St. Louis, and Bank of St. Louis. Oklahoma ■ BANK O F OKLAHOMA, Tulsa, has elected four vice presidents—Jim Young, Bill Suliburk, Phillip Hoot and Richard Erbert. Mr. Young has been with the bank nearly four years and is in the metropolitan department; Mr. Suliburk, who is in the investment division, has been there five years. Mr. Hoot went there from Capital National, Houston, YOUNG JUSTICE where he served in the correspondent department. ■ L. JO E JU ST IC E has been elected vice president in the commercial loan division at First City National, E l Paso. He joined the bank nine years ago, leaving in 1975 to join Texas Bank, Dallas, where he served in the corre spondent department. He heads the correspondent department at First City National. ■ BRYAN BURK has been elected a vice president and trust officer a£ First City National, Houston. He joined the bank recently following service with another Houston bank. HOOT • SULIBURK HALDEMAN KIRKLAND ■ FRANCIS H. PHELAN has joined United Missouri Bank, St. Louis, as vice president, with duties in corporate and correspondent development for the bank and its HC, United Missouri where he was in the correspondent bank department, and also is in the correspon dent bank department at Bank of Okla homa. Mr. Erbert, in the bank’s energy department, formerly was with Getty Oil. In other action, Bank of Oklahoma named these assistant vice presidents: Denny C. Wright and Len Fears, data processing; Jim McKinney and Douglas L. Goss, trust division. Four new trust officers were elected: Sue Jane Price, Mike George, Robert Fugate and Ever ett Steffen. ■ DEN ZIL E. OSW ALT and Jerry W. Hopkins have joined the regional bank ing section of First National, Tulsa. Both are assistant vice presidents. Mr. Oswalt joined the bank in 1971 and Mr. Hopkins is a recent addition to the bank’s staff. ■ ROYCE M. HAMMONS has been named manager of the correspondent banking department at First National, Fort Worth. He was formerly a vice president at Republic National, Dallas, 78 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis HAMMONS Index to A d vertisers • Alvis & Co., Jackson, Miss............................46 Arkansas Bank & Trust Co..................... ......... 43 Arlington Hotel ............................................... 54 ATM Manual ..................................................... 47 Bank Board Letter ........................ 39, 54, 55, 75 Brandt, Inc.......................................................... 62 Canton (Miss.) Exchange Bank .................... 46 Citicorp .............................................................. 20 Citizens National Bank, Decatur, III............... 56 Citizens State Bank, Springer, N. M...........38 Commerce Bank, Kansas City .................... 67 Commercial National Bank, Kansas City, Kan. ........................ 77 Commercial National Bank, Little Rock . . . . 40 Cumberland Securities Co., Inc...................... 70 De Luxe Check Printers, Inc......................... 19 Doane Agricultural Service, Inc..................... 8 Downey Co., C. L.............................................. 9 Durham Life Insurance Co............................. 3 Farmers Grain & Livestock Hedging Corp. . 16 Financial Placements .................................... 18 First Alabama Bancshares ..............................12 First National Bank, Amarillo. Tex..................36 First National Bank, Artesia, N. M.................. 38 First National Bank, Belleville, III................... 58 First National Bank, Chicago........................ 11 First National Bank, Jackson, Miss.............. 13 First National Bank, St. Louis .................... 80 Fourth National Bank, Tulsa ........................ 31 Hancock Bank, Gulfport, Miss....................... 44 Harrow Smith Co.............................................. 42 Hattier, Sanford & Reynoir ......................... 46 Hill, Crawford & Lanford, Inc.......................... 42 Industrial Life Insurance Co.......................... 9 L’Ermitage Hotel ................................................ 64 Liberty Nat’l Bank & Tr. Co., Louisville .2 2 Liberty Nat’l Bank & Tr. Co., Oklahoma City 2 Louisville Trust Bank, Inc............................... 52 Manufacturers Hanover Commercial Corp. 65 Memphis Bank & Trust Co......................33, 51 Mercantile Bank, St. Louis ........................... 5 Mosler Safe Co.................................................. 61 National Bank of Detroit ........................... 15 National Boulevard Bank, Chicago ............. 59 National Stock Yards National Bank ......... 79 Northern Trust Co., Chicago ........................ 73 Northwestern Banker ................................... 71 Olan Mills ......................................................... 7 Plus Group, The .............................................. 69 Santa Fe (N. M.) National Bank ................ 39 Security Bank, Corinth, Miss...........................46 Third National Bank, Nashville .................. 48 US Life Credit Life Insurance Co................... 8 Whitney National Bank, New Orleans ......... 17 MID-CONTINENT BANKER for May 15, 1977 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis ■■■ On the job. Wherever they're needed. Some will meet you ard greet you at your convention. Several will be calling on banks in their territories. But others—with authority to make dec sions—will be back at the bank W ork with a banker who knows what his bank can do for you. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis At First National Bank in St. Louis, our corre spondent bankers are trained in what our bank can do for you. Across the board. Department by department. The result is men with solid experience and individual authority. So they can make fast decisions for you on their own. They’re backed by a bank with strong, steady growth. And total banking capabilities including overline loans, bond department services, computer ized check collection, cash management systems. Plus our annual correspondent seminars where you can exchange ideas and learn about new profit opportunities. Get to know your First National correspondent banker. He knows his bank. He’d like to put us to work for you. F irst National B ank in S t.Lo u is ¡¡¡r^g Member FDIC I H I I H
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