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ï î SSN NORTHERN EDITION 0026-296X) OCTOBER, 1984 Designers Share Expertise With Bankers — Pg. 8 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Photo Identifications — Page 9 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis No Company, Anywhere In The United States, Can Give Your Bank As Much Help In Running A Smooth, Profitable Credit Insurance Operation As North Central Life. Protection all ways North Central Life Insurance Company NORTH CENTRAL LIFE TOWER, 445 MINNESOTA STREET BOX 43139, ST PAUL, MN 55164 In Minnesota call 800-792-1030. In Iowa, Wise., North and South Dakota 800-328-1612. All other states 800-328-9117. Compare For Yourself. How Does Your Current Credit Insurance Company Measure Up Tb North Central Life? What N orth Central Life Offe rs s What Your C om pany Offers f What N orth Central Life Offers Fast, Computerized Claim Settlements r Insurance Plans That Fit Virtually Every Loan Situation r y ✓ ✓ Id J gf El'1n Special Programs for the Large Borrower r r r~ Nation-wide Toll-free WATS Service Instant, Over-the-phone Rate Calculations For Difficult Loans V V a / ivi Incentive Plans to Help Increase your Productivity Home Office Customer Service Department Simple, Automated Premium Reporting System Computer-based Measurement and Control System to Help You Manage Your Business Personalized Training For Your Support Personnel Simplified Procedures Manuals For Administrative People Complimentary Sales Aids, Brochures and Point-Of-Purchase Materials Instant, Over-the-phone underwriting approval for over-limit coverages Sales and Insurance Training Programs Designed for Bankers What Your Com pany Offers ✓ vi Free Analysis of Your Current Insurance Operations “Captive Company” Capability r Professional, Experienced Account Field Representatives If You’re Not Getting All Of These Services From Your Current Credit Insurance Carrier, Maybe You Should Call North Central Life... America’s Number One Credit Insurance Service Organization https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis CONVENTION CALENDAR MID-CONTINENT BANKER (Incorporating MID-WESTERN BANKER) Oct. 20-24: ABA Convention, New York City. Oct. 21-Nov. 1: ABA National Com m ercial Lending School, N or man, Okla., University of Okla homa. Oct. 28-31: Robert Morris Associ ates Fall Conference, San Juan, P. R., El C en tro C onvention Center. Oct. 28-N ov. 2: ABA N ational School on H um an R esources, B oulder, Colo., U niversity of Colorado. Oct. 30-Nov. 2: Bank Administra tion Institute M icro-Com puter C o n feren ce , D allas, Amfac Hotel. Nov. 4-7: Bank Marketing Associa tion C o rp o ra te B usiness D e velopm ent Training Workshop, New Orleans, Fairmont Hotel. Nov. 8-11: Bank Directors Assem bly 59, Phoenix, Arizona Biltmore. Nov. 11-14: ABA National Agri cu ltu ra l B ankers C o n feren ce Kansas C ity, H yatt R egency/ Crown Center. Nov. 11-16: ABA National Com m ercial L en d in g G ra d u ate School, N orm an, O kla., U ni versity of Oklahoma. Nov. 26-30: Bank Marketing Asso ciation Southwestern Essentials of Bank Marketing School, Hous ton, University of Houston. Nov. 27-30: Bank Administration In stitu te M oney Transfer D e velopment Conference, Chicago, Hyatt Regency Chicago. Nov. 28-30: Association of Bank Holding Companies Fall M eet ing, Baltimore, Hyatt Regency Baltimore. Dec. 5-7: Dealer Bank Association Public Finance Seminar, Boston, Westin Hotel. Dec. 9-12: Bank Administration In stitue ATM/7 National Confer ence, New O rleans, Sheraton Hotel. Dec. 9-14: Bankers Association for F o reig n T rad e In te rn a tio n a l L en d in g E x ecu tiv e S em inar, Charlottesville, Va., University of Virginia. Jan. 13-15: C o n su m er B ankers Association Innovations in RetailB anking P ro d u cts, O rlan d o , Fla., Sheraton Twin Towers. 4 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis IN THIS ISSUE Volume 80, No. 10 October, 1984 6 NEWS ABOUT BANKS/BANKERS Promotions, mergers, deaths, consolidations 8 CONSULT WITH DESIGNERS EARLY TO SHAVE COSTS Builders’ advice to bankers 16 BUILDERS RESPOND TO QUESTIONS From expansion-minded bankers 21 TECHNOLOGY’S E FFE C T ON BANK OF FUTURE An integrated, flexible, well-planned system is result 28 COMPUTERS REGULATE BANK ATMOSPHERE Putting CEOs’ anxieties to rest 36 IN-HOUSE ED P PROVES WISE MOVE For bank reverting fro m service bureau 39 SENATE PASSES BANKING BILL It eliminates nonbank loophole 40 PROVISIONS THAT A FFECT BANKS In Tax-Reform Act o f 1984 48 FED HOLDS PAYMENT-SYSTEM-RISK SEMINARS To encourage bankers to comment on proposals 54 BANKING SCENE Lessons fro m failure o f Butcher banks Mid-Continent Banker Staff Ralph B. Cox Publisher MID-CONTINENT BANKER is published monthly by Commerce Publishing Co., 408 Olive St., St. Louis, Mo. 63102. Lawrence W. Colbert Vice President, Advertising POSTMASTER: Send address changes to MID CONTINENT BANKER at 408 Olive St., St. Louis, MO 63102. Rosemary McKelvey Editor Printed by The Ovid Bell Press, Inc., Fulton, Mo. Second-class postage paid at St. Louis, Mo., and at additional mailing offices. Jim Fabian Senior Editor Subscription rates: Three years $27; two years $2 0 ; one year $1 2 . Single copies, $ 2 .5 0 each. Foreign subscriptions, 50% additional. John L. Cleveland Assistant to the Publisher Marge Bottiaux Advertising Production Manager Nancy Gilbreath Staff Assistant Shelia Humphrey Subscriptions Editorial/Advertising Offices 408 Olive St., St. Louis, Mo. 63102. Tel. 314/ 421-5445. Commerce Publications: American Agent & Broker, Club Management, Decor, Life Insur ance Selling, Mid-Continent Banker and The Bank Board Letter. Officers: Donald H. Clark, chairman emeritus, W esley H. Clark, president and chief executive officer; James T. Poor, executive vice president and secretary; Ralph B. Cox, first vice president and treasurer; Bernard A. Beggan, David A. Baetz, Lawrence W. Colbert and W illiam M. Humberg, vice presidents. MID-CONTINENT BANKER for October, 1984 BANK SERVICE By coordinating your bond portfolio with your banking objectives, you can improve youir bank's overall position. That's the concept of BANK SERVICE,® a service of L. F. Rothschild, Unterberg, Towbin. We have a unique approach toward a n a lyzing banking activities, and over 30 years of experience. We assign a team of experts to exam ine how your banking activities and bond portfolio work together. We review your rate sen sitive assets and liabilities, your tax situation, your overall rate struc ture—everything that effects per form ance. We probe the ways all these activities are contributing (or failing to contribute) to your bank's overall goals. Then we com e b ack to you with an objective, thirdparty recommendation. It demonstrates steps that can strike a chord between your banking o b jec tives and bond portfolio, For exam ple, we might show you how to reduce your market exposure without d e creasing perform ance. Or how to gain some tax advantages through bond exchanges. We also offer two other inno vative products that complement your BANK SERVICE® analysis. Our Portfolio M anagers System monitors your portfolio, does its accounting, values all holdings and more. Then there's a Fixed Income Computer Service which will introduce new tech niques to help immunize your portfolio from rate fluctuations. BANK SERVICE'S® total orchestration of bond portfolios with banking activities has helped hundreds of banks around the country achieve their goals. Perhaps that's why the substantial majority of our business is repeat business. To learn how we can be instru mental in improving your bank's position call Stephen H. Kovacs, Special Limited Partner, BANK SERVICE® at (212) 425-3300, or write to 55 Water Street, New York, NY 10041. Because it's time your bond portfolio worked in concert with your banking activities. L. F. ROTHSCHILD, UNTERBERG, TOWBIN BANK SERVICE® We help orchestrate banking success. MID-CONTINENT BANKER for October, 1984 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 5 W W m About B an k s & B an k ers ILLINOIS H ollis W. Radem acher has b ee n named to the newly established post of chief credit officer, Continental Illi nois Corp. and C ontinental Illinois National, Chicago. He formerly was head of the Chicago/Midwest financial services departm ent and joined Con tinental in 1957. He became executive vice president in 1981. In other action at the bank, Garry J. Scheuring was made executive vice president and head of the newly established loanworkout group and reports directly to M r. R ad em ach er. Mr. S ch eu rin g formerly was senior vice president and head of the special industries depart ment. He went to Continental in 1964. Magna Group, Inc., Belleville, has announced two mergers. Shareholders of Central Illinois Banc Shares, Inc., Springfield, have approved a plan whereby Central Illinois will become a subsidiary of Magna. The m erger will be consummated following regulatory approval, expected the middle of this month. Shareholders of First National, Marissa, First National, Smithton, and Freeburg Bancorp, Inc., voted in favor of a m erger with Magna Group, and it took place in August. Raymond M adorin Dies Raymond E. Madorin, 72, died August 26 after a year’s illness. He spent 47 years with the former National Stock Yards National, National City, and was head of its correspondent bank department when the latter was acquired in late 1977 by Boatmen’s National, St. Louis. Mr. Madorin, who was vice president, retired at that time. INDIANA Kathleen J. Curry has been prom oted to convenience banking center mana ger at Lincoln National, Fort Wayne. She joined the bank in 1969 and most recently was East State Convenience Banking C enter manager. 6 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Money Management Corp., M errill ville, has filed a notice with the Chica go Fed proposing that the H C ’s em ployee-stock-ownership plan acquire control of the HC and its subsidiary, Bank of Indiana, through an exchange of common stock for cash and a new class of preferred stock. Exchange of stock will be accomplished by creation of a new wholly owned subsidiary of the em ployee-stock-ow nership plan and m erger of the subsidiary into the HC. The effect of the action is to make the HC and Bank of Indiana employeeowned financial institutions. The pro posal requires approval of sharehol ders and regulatory agencies. MICHIGAN NBD Bancorp, Inc., D etroit, and United Michigan Corp., Flint, have entered into a definitive agreem ent under which United Michigan would becom e affiliated with NBD. Total value of the transaction is nearly $78 million. Under the agreem ent, United Michigan would merge with a subsidi ary of NBD Bancorp. The m erger is subject to approval of a majority of United Michigan’s shareholders and bank-regulatory agencies. Gary L. Konsler has been appointed vice president, trust investm ent divi sion, National Bank of D etroit. He joined the bank in 1978 and became second vice president in 1980. David B. Wirt has been named president/C EO , First of America-W ayne Oakland, Royal Oak. He formerly was sen io r vice p re s id e n t, hum an resources/marketing, First of American Bank Corp., Kalamazoo. D onald R. M onterusso has b e e n e le c te d p re s id e n t/C E O , C e n tra l Michigan Bank, Big Rapids. He suc ceeds Ray Scroggins, who resigned. Mr. M onterusso jo in ed O ld K ent Bank, G rand Rapids, in 1965 and, m ost recently, was vice p resident/ m anager, in stallm en t loan d e p a rt ment. Both banks are affiliates of Old Kent Financial Corp., Grand Rapids. MINNESOTA Norwest Corp., Minneapolis, has con solidated two of its northern M inneso ta banks into one bank, to be called Norwest Bank Mesabi. The two banks involved are Norwest Bank Virginia and Norwest Bank Eveleth. Assets of the consolidated bank total approx im ately $138 million. John R. Oltmanns, who has been serving as presi dent of both banks, continues as presi dent of Norwest Bank Mesabi. First Metro Services — a new subsidi ary that combines the operating func tions of First Bank Minneapolis and First Bank Saint Paul — has promoted five officers in the special-services and item-processing groups. They are Ber nard E. Conlin to executive vice presi dent and special-services group head; Susan R. Scheerer, Michael R. Addy and Michael R. Parks to vice presi dents in the special-services group; and Ruth Moderson to vice president/ m anager, sy stem s/m eth o d s, ite m processing group. OHIO Stephen J. Miller has been elected a vice president, Lancaster area, BancOhio National, Colum bus. E lected assistant vice presidents, Columbus area, were Neil R. Courter, Donald P. Gray, Gary E. Longstreth and Donald T. Miller. H Cs' Merger Approved The Fed has approved the merger ofBancOhio Corp., Columbus, into National City Corp., Cleveland. The order approving the merger included as conditions to the merger divestiture by BancOhio National of certain branches in Fulton, Erie, Summit and Columbiana counties and a commitment from National City Corp. to divest its subsidiary bank in Fairfield County as promptly as practical following the merger. (Continued on page 52) MID-CONTINENT BANKER for October, 1984 ZERO TO COMPLETION IN AS FEW AS NINETY DAYS. To capture that new or expanding market, you have to move fast. Very fast. That’s where we come in. An MBI Telleron can be designed, built, equipped and furnished on your site and have you in business in as few as 90 days. You’ll be taking new deposits while the competition is still reviewing plans or listening to all the reasons why their building will not be ready on time. How we do it is a long story. Let us tell you how we can make it short and sweet for you. THE FIRST SOURCE IS STILL THE BEST SOURCE ®iMim A su b sid iary of B a n k Building Corporation Contact: John Berninger, Marketing Manager or Diebold, Inc. Phone (216) 489-4196 12690 60th Street North, Clearwater, Florida 33520 Phone (813) 536-9437 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Memo To Bankers: Consult Designers Early to Keep Project Costs Down Top: Boardroom at Cenlerre Bank, Cape Girardeau, Mo., a project of Kuhlmann Design Group. Middle: Pri vate office at Guaranty Bank, Mt. Pleasant, Tex., a project of Bank Build ing Corp. Bottom: Exterior of Security First National, Alexandria, La., a proj ect of HBE Bank Facilities. The three design/build firms are headquartered in St. Louis. MID-CONTINENT BANKER for October, 1984 O N T H E C O V E R . Examples of recent bank-budding projects: Top row, left: Centerre Bank, C ap e Girardeau, M o., project of Kuhlmann Design Group, St. Louis; top row, right: Old National, Centralia, III., project of the Burce C o rp ., St. Louis; second row: Farmers & Merchants, Foley, A la ., project of Design-Build Con cepts, Atlanta.: third row, left: Willow Bend Nationa , Plano, Tex., project of Son C o rp ., Wichita, Kan.; third row, right: Guaranty Bonk, Mt. Pleasant, Tex., project of Bank Building C o rp ., St. Louis; bottom row: Peoples State Bank, St. Joseph, Mich., project of HBE Bank Facilities, St. Louis. HE IMPORTANCE of bank de m ent on a profit-or-loss basis, says Ken that branch, says Carl Conceller, vice signers getting in on the ground Fraiser, contract manager at Bunce. president-sales at HBE. The cost sav floor of a construction or remodelingThey want to make certain they will ing is more like 35%, because support project is stressed by the major bank get the most for their money. He adds systems for remaining branches con design/build firms. that proper planning can result in sav tinue. This is but one of num erous points ing on manpower needs in the new Speaking to the same topic. Thomas made during a series of discussions building. The savings can be great L. Spalding, BBC’s director of m arket held recently betw een bank designers enough to pay for the entire cost of a ing, says the major reason to close a and the editors of M id -C o n tin en t building over its life span. However, branch is unprofitability. However, B anker . Firms included HBE Bank such savings usually can take place bankers are learning that changing the Facilities, Bank Building Corp. (BBC), only in the design phase. product mix to m eet the needs or the the Bunce Corp and Kuhlmann D e “We always say that you save dollars facility’s customers can turn an unprof sign Group, Inc., all headcnjartered in during the design phase and dimes itable facility into a profitable one. St. Louis. curing construction,” he says. An excellent way to shave costs is to I t ’s important for a design firm to Another area with great impact on build operations centers that can ser get involved in the project during the cost/effectiveness is the mix of services vice all facilities in a bank or HC sys planning or design phases because a bank intends to offer at a given loca tem, says Mr. Spalding. Anoperadons opportunities to save on costs are neg tion, says Frank Bottini at BBC. center enables a bank or HC to consoli ligible after construction begins,” says “ D ifferent m ark et areas require date back-room activities for all facili Bunce’s Jim Johnston, contract mana different service mixes,” he says. “For ties, a fact that is becoming more rel ger. instance, not all branches need back- evant new because of the increasing “ W e design an env ironm ent for office capability, since such functions num ber of m ergers involving banks banks that attracts customers and en can be centralized. I f s essential that and HCs. ables the bank to control costs,” says bankers define their product mix so “A true operations center usually D on F lo tt, financial consultant at designers can formulate plans that are doesn t involve corporate offices or HBE. Designing a proper environ in agreem ent with the needs such a public interaction; thus, it can be less m ent is essentia] so the bank can com product mix requires. costly to site and build. It can be lo pete on an equal footing with other There have been a lot of articles in cated on the outskirts of town or even institutions, he adds. die media about banks closing branch in a cornfield because it doesn’t have to ‘The right kind of physical facility is es. However, banks are finding that be accessible to the general public, j ust as much of an asset for a bank as a closing a branch doesn’t result in a says BBC’s Frank Bottini. “And, since factory building is for a manufacturing 100% decline in the cost of operating it doesn’t have to be a showplace, it can firm ,” says F rank A. Bottini, BBC marketing manager. “It s indispens able to most banks’ ability to make m oney.” Building design is evolving because of bank deregulation s effects, says Ed Ortm ann of Kuhlmann. “ Bankers are starting to look at their space needs much as a retailer would — stressing visibility, accessibility and serv ice.” Most bankers have come around to thinking that planning must take into consideration new services being spawned by deregulation; ser vices like discount brokerage and in surance. “Bankers aren’t sure what they may be selling five years from now, and facility of Sevier County Bank, Sevierville, Tenn., features drive-up night deposi they’re trying to build flexibility into Branch tory, walk-up window and walk-up ATM. The manufacturer, National Bank Builders & their plans,’ Mr. Ortm ann says. Equipment, Inc., Walls, Miss., says facility represents new trend toward convenience for Bankers are evaluating each depart customer where he/she lives. See article on page 16. T 3HD-CONTINENT BANKER for October, 1984 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 9 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis " ß m 44Several firm s told us to redesign our bank, inside and ou t." At HBE, we create environments that work. In Lecompte, Louisiana, the bank’s problem was not unusual—they had outgrown their limited space. HBE worked closely with Bank of Lecompte President Wade Jones to plan, design and build a new facility on the bank’s original site. A building can cost as much or as little as any budget can afford. But, unless the final product works best for you, it’s never worth the price. HBE designs banks from the inside out...from the original concept to the last desk. No other firm works with you so closely on every aspect of your facility. Customer service and continuity were also maintained because HBE remodeled in phases, allowing no loss of security or business days. “We*ve enjoyed a strong deposit increase since the construction of our new HBE bank.** “Productivity, morale and general good feelings among our employees all increased.'* Customer deposit growth is not one of our guarantees, but when it happens, like it did in Lecompte, we’re not surprised. Because professionals from every area of planning, design and construction work together on the HBE team, we can solve your bank’s problems better; on time and on budget. You will know exactly what your project will cost before any contract is signed. No cost overruns. No surprises. No allowances. At HBE, your cost is guaranteed before we build and the quality assured after we leave. HBE banks are designed to be both comfort able and productive. Our experience has proven that an attractive business area for customers can also be a pleasant and pro ductive working environment for personnel. T hat’s a dividend that continues to pay for years and years. “As far as value for the dollar, HBE included everything. We got a great price.*' Wade Jones thought that the plan/design/ build system of construction would be too expensive. HBE showed him it doesn’t have to be. After checking similar projects in Louisiana, Wade Jones agreed. For inform ation on how HBE can work for you, contact Sally Eaton at 314/567-9000. HBE Bank Facilities, 11330 Olive Street Road, St. Louis, Missouri 63141. “HBE was the only one that could do it. Affordably https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis » Your System for Success Bank 'Energy conservatio n still is an im portant facto r in designing a bank.' be designed for maximum productiv ity.” It’s important to design flexibility into banks so they will be able to offer new services as they come on line, says Ed Ortmann at Kuhlmann. “Teller counters may come out in the future and be replaced by desks. We may be dealing only with personal bankers, and teller functions may be handled electronically.” M ike Lefferson, vice p re sid e n tinteriors at Bunce, says technology is evolving that eventually could p re clude the need for wiring in buildings. He says it’s essential that designers take into account what technology has to offer today and what it may offer in the future. “It’s possible to talk to a TV set with a wireless com puter using an infrared beam, ” he says, “which could preclude the necessity of putting wiring ducts into plans for electronic offices of the fu tu re.” Right now, he adds, inter office-information exchange can be made across dedicated or telephone wires. More current design trends include rearrangem ent of traditional services, says Thomas Spalding at BBC. For in stance, it’s becoming popular to place loan departm ents at the front of the bank lobby and tellers at the rear. Cal culators are being placed at lobby counters for the convenience of cus tomers. Some banks are providing separate areas for up-scale customers, says Tom L om bardo, vice p resid en t-sales at HBE. You’re seeing more sit-down te lle r a rra n g e m e n ts and c a sh dispensing machines in financial in stitutions. Space must be allowed for compu ters, he adds, since more banks are finding computers to be cost effective. No longer is it true that a bank needs about $100 million in assets to afford a computer; the new figure is only $25 million — and, in some cases, even smaller. Space designers m ust know the functions of a bank in order to create efficient work stations, says Don Flott at HBE. The nature of functions deter m ines w h at e q u ip m e n t w ill be needed. A piece of equipm ent can pose problems because its dimensions are not changeable. You can’t trim an inch from a piece of equipm ent to make it fit into a given space. In addi tio n , e q u ip m e n t noise m u st be 12 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis screened off from customers and em ployees. It’s becom ing increasingly im portant to design work areas that take into c o n sid e ra tio n th e re la tio n sh ip b e tw e e n peo p le and the equipm ent they use on a routine basis. “We provide under-floor ductwork so desks can be w ired easily when needed,” says Ed Ortm ann at Kuhl mann. “Keyboard drawers or articulat ing arms should be designed in to either modular or standard furniture to handle the required com ponents of modern data-handling equipm ent. If the equipm ent isn’t yet in use at a bank when plans are made, provision must be made for it.” Items to Consider When Planning a Building • • • • • • • • • • Product mix Manpower needs Operations centers New-service flexibility Customer segmentation Equipment positioning Lessening impact of ATMs Energy conservation Exterior appearance Interior atmosphere “Energy conservation still is an im portant factor in designing a bank,” he adds. “It’s unbelievable what had been accepted as the norm in the past. But because of rising energy costs, banks now are using insulated glass, more wall and ceiling insulation, heat pumps and more efficient equipm ent. Bank ers are w illing to spend the extra money for these conservation m ea sures to get the pay-back through the years the building will be in use.” Carl Conceller at HBE says energy conservation has resulted in use of less glass and incandescent lighting in proj ects. Heat pumps are being used both to withdraw and inject heat in specific areas of buildings. He adds that constant efforts are being made to keep maintenance costs down. This is achieved in part by use of stain-free fabrics and more durable materials of all sorts. Initial cost of such item s is h ig h er, b u t re d u ctio n in maintenance costs makes the outlay economical. The atmosphere created by a build ing project is im portant to a bank’s bot tom line, says BBC’s Thomas Spald ing. “Appearances of commercial banks no longer are as formidable as they once w ere,” he says. “Banks want their premises to be inviting and comfort able, to take on the aspects of an area that’s suitable to a social gathering.” The trend is toward warmer, lessaustere atmospheres in banks, says Ed Ortmann of Kuhlmann. It is important that the customer and employee both feel relaxed and experience a sense of sec u rity w ith in th e bank. This is ach iev ed by avoiding an o v erly “trendy” or institutionalized interior, he says. Designers at Bunce stress the im portance of a warm atm osphere in banks. “People feel more comfortable when they feel the same sort of atmos phere at the bank that they feel at hom e,” says Mike Lefferson. “If they feel good at home, why shouldn’t they feel good at the bank?” W hat about the impact of ATMs on bank designs? R estrictions on ATM p lacem en t keep the machines from having a major im pact on building design in many M id-Continent states, says Tom Lom bardo at HBE. ATMs aren’t contribut ing to a significant reduction in lobby traffic. The machines represent im per sonal service, which many customers are not yet ready to accept. Frank Bottini at BBC agrees that ATMs are not causing revolutionary changes in bank design. “There’s no proof that the ATM will accomplish much of what has been predicted for it,” he says. “T here’s a 33% custom er-usage wall, beyond w hich ATMs haven’t been able to p e n e tra te ,” he adds. “In a typical situation, even though as many as 70% of a bank’s customers have been issued ATM cards, only 20% of those custom ers have ever used the ATM. Only when banks spend lavishly on ATM promotions does usage even get close to the 33% wall.” M odular stru c tu re s a re n ’t w hat “they are cracked up to b e ,” says Ed Ortm ann of Kuhlmann. His feeling is that a traditional building can be built as fast and at an expense comparable to that of a modular structure by using a lighter, wood-frame type of construc tion. Jim Johnston at Bunce sees con- MID-CONTINENT BANKER for October, 1984 Before your problem s get the best of you, get the best of them . First National Correspondent Consulting Services offers educational and training opportunities that deal with vital issues and problems facing bankers today. Each of these “ hands-on” courses features experienced instructors from First National Bank of Louisville— the region's largest and strongest bank. You'll gain valuable information and skills that can help you make your bank stronger and more profitable. And you'll earn Continuing Education Units (CEU 's) from the University of Louisville. Credit Analysis School and Workshop. Gives you the skills and expertise to analyze, structure, docum ent, review and adm inister com m ercial credits. N ovem ber 20-21. (1.2 CEU's) Loan Review School and Workshop. A must for those whose responsibilities require administering and monitoring individual credits, industry segments or your entire loan portfolio. N ovem ber 12-13. (1.2 CEU 's) Professional Sales School. A required course for o ur own officers. A must for professionalism in selling products, cross-selling services and developing custom er contacts. O cto b er 22-24, D ecem ber 10-12. (1.8 CEU's) Officer Call Program. A com pletely organized program that can be easily im plem ented, m onitored regularly and enhanced as needed. Addresses the issues of training, m otivation, docum entation and individual callm anagem ent. Features individual goal-setting by each o fficer, use of a customized manual, implementation of custom ized form s for advance preparation and the reporting of call results. Includes training sessions and a quarterly officer meeting co n ducted by First National Bank. This program has been im plem ented in banks ranging in size from $70,000,000 to $270,000,000. Call for a presentation. Personnel Administration Seminar. Addresses such issues as salary adm in istration, regulatory requirem ents, policy manuals and affirmative action plans. Dates To Be A n no unced . (1.2 CEU's) Agricultural Lending School and Work shop. Focuses on the credit analysis, cash flow and loan review procedures required for agri-business and farm production loans. O cto b er 25. (.6 CEU's) Problem Loan Seminar and Workshop. A systematic approach to identifying and evaluating potential problem loans prior to the loss stage. O ctober 2. (.6 CEU 's) Put it to w o rk for you MID-CONTINENT BANKER for October, 1984 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis For additional inform ation call Correspondent Consulting Services: Direct-(502) 581-7791, Kentucky WATS-(800) 292-2272. In neighboring states-(800) 626-6515. MEMBER F.D.I.C. 13 struction speed the only advantage of a modular building. Such a structure costs just as much and perhaps even a little more than conventional construc tion, he says. “You never move it and seldom do you ever expand it,” he adds. “W hen designing a building today, you do it with the thought that you may want to expand some day. A modular building can be confining.” O ther points made by bank design ers: • Task lighting is the most precise and econom ical way of p roviding adequate light in work areas. • Designating the design firm as construction manager can result in a savings of at least 10%, due to the feasi bility of specifying alternative methods and materials at a cost savings with no loss of efficiency or effectiveness. • The client’s perspective must be taken into consideration when drawing up plans for a building. A builder/designer may consider something to be impractical because he doesn’t see it as the client sees it. For example: A de signer judged a building site to be in adequate because there wasn’t suffi cient parking space. The client saw it differently: he arranged with a church NEW ssss* s s r CONSUMER LENDING POLICY A M anual for D irectors, M anagem ent and Lending O fficers B y Dr. Le w is E . D avids 200 Pages $26.00 B a n k d ire c to rs d o n ’t get in volved in co nsu m er lending, per s e , but they do get involved in for mulating consum er-lending policy. In order to form ulate such policy intelligently, they M U S T be fam iliar with the broad sco p e of consu m er lending a s well a s the pitfalls such lending can hold for a bank. Dram atic in c re a se s in personal bankruptcies call for new policies in the c o n su m e r-le n d in g a r e a . State usury law s are being revised or preempted by federal statutes. Existin g “ rule of thum b” lending practices a re n ’t a lw a ys valid in to d a y’s changing environm ent. T h is 208-page m anual includes an array of co n su m er loan policies in force at v a rio u s-size d b an ks, provides ch e ck lists of topics on in stallm ent-credit policy and pro ce d u re s and p o licy c o m p o n e n ts ; model application form s; an o ver view of the Fed eral R e s e rv e ’s co n su m e r re g u la tio n s; the F e d e ra l R e se rv e Functional C o st A n a ly sis of the installm ent-loan function; in stallm ent-loan departm ent p lan s; consum er-credit term inology, and bibliography of re fe re n c e m ate rials on installm ent loans. next door to swap parking privileges — bank customers could use the church’s parking lot on w eekdays and th e church could use the bank’s lot on Sun days. • A new building results in new business for a bank. In most cases, ex pectations for new business are ex ceeded when it comes to new customer/deposits attraction. • Movable or landscape partitions usually are not advised for public areas of banks because it’s im portant for a bank’s quarters to look perm anent to the public. • W hen m ovable p artitio n s are used, they should be pre-wired. Some are made to look like regular walls. Demountable partitions perm it spaceneed shifts to be made over a period of time. • Renovation of a historic building can result in goodwill for a bank as well as lower cost for a project. • The exterior of a building should project the bank’s image of itself. It should not have a “designer-label” appearance, b u t should p re se n t a good, clean design. • It’s important to have a buildingcode expert on each construction job to avoid unnecessary delays with inspec tors. • Bank facilities must be accessible to handicapped individuals — both customers and employees. All designers agreed the bank of the future must be in a position to compete effectively with whatever competitor appears on the scene. Proper planning should enable a bank to achieve this goal. — Jim Fabian, senior editor. • Fenco Bank Equipment. This com pany has introduced a prepackaged, in-stock teller cash station designed for d o u b le -te lle r o p e ra tio n w ith a m achine well back panel. Included with the Model 1020 — which can be installed in less than an hour — are: two teller cabinets, two knee space Save! Send check with order. TH E BANK BOARD L E T T E R 1 Copy @ $26.00 408 Olive St., St. Louis, MO 63102 5 or more @ $20.00 e a :--------Consumer Lending Policy N a m e ............................................................................................Title Bank ............... S t r e e t ............... City, State, Zip 14 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis I I I shelves, two 10-com partm ent cash tray s, two keylock cov ers, one machine well back panel, two hollow metal end panels, two back panels, two w astebaskets and two pin and clip trays. W rite Fenco Bank Equipm ent, P. O. Box 516, Burlington, NJ 08016. MID-CONTINENT BANKER for October, 1984 Rapid transit. Speed. It’s the essential ingredient of intelligent movement of money. It’s also why more correspondents choose the rapid transit system at Commerce. Our day starts with balance reporting at 5:00 A.M. By 9:00, we’re on the phone with customers, advising them of how much money is immedi ately available for investment and how much is deferred. Same day available balance reporting coupled with timely information on previous day’s ending ledger balance enables correspondents to manage their funds position accurately and maximize profits. What’s more, we handle exception items, exceptionally fast. Other banks take weeks to get return items back to you. Our unique post office box and special zip code allow us to handle these items quicker. Fast turnaround on return items means less float as well as minimal risk of embarrassment and loss. In addition, we have a special problem-solving team for cash letter adjustments. Our Special Adjustment Staff (S.A.S.) pays quick attention to your problems. If an error has been made in the checks sent to us for clearing, this special team quickly catches the error and adjusts the correspondent for the proper amount. Large dollar adjustments receive immediate priority. Rapid transit at Commerce adds up to the best availability schedule around. If you’d like to plug into our rapid transit system, call your Correspondent Banker ^ r W r i t Y i A i T O at Commerce— now. V / L O I l l l l l t r t v D d llK No one knows the value of Kansas City (816) 234-2000 • 10th & Walnut • Kansas City, MO 64141 time better than Commerce. MEMBER FDIC MID-CONTINENT BANKER for October, 1984 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 15 Builders Respond to Questions From Expansion-Minded Bankers UMEROUS questions confront sultant, designers and su p p lier of bankers w hen they begin to financial buildings. Service is the key plan for expansion facilities. Bankers to increasing market share. The facility often take their questions to bank de- or building needs only to be conven signers/builders for answers. iently located, functionally designed M id -C o n tin en t B anker ’s editors and attractive. asked designers/builders to com m ent Image always will be an issue of im on questions they often are q u eried portance with banks, but convenience about by bankers. is more important than image in the The questions and answers follow. quest for market share, says Mr. Wil son. Institutions having the most con • Will ATMs lessen the need for venient and accessible branches will new lobby space? have an edge over competitors when it Not to any appreciable degree, says comes to market share. Richard L. Bacon, Ste. Genevieve, The physical image a bank presents Mo., architect. ATMs will continue to to the public is the primary motivation be more of an after-hours conveni in attracting new business, says Mr. ence. They won’t replace the satisfac Bacon. This will be increasingly im tion of dealin g w ith a courteous, portant as laws perm it financial institu pleasant, efficient teller during normal tions to become more alike as far as banking hours. services are concerned. ATMs most definitely will lessen the • Will banks build fewer branches need for new lobby space, responds Dale Wilson, designer/engineer with in the future? They will build fewer large tradi National Bank Builders & Equipm ent, Inc., Walls, Miss. ATMs not only will tional branches, says Mr. Wilson, but lessen the need for new lobby space, they will build more convenient bank but will shrink existing lobby space ing stations. P recision-built, mini, substantially. Today’s generation is us modular banks are a must for the fu ture to counteract higher prices on tra ing ATMs. One of the best forms of housing for ditional buildings. These large build ATMs is a free-standing structure that ings no longer are affordable. Banks will not build fewer branches calls attention to the 24-hour availabil in the future, says Mr. Bacon. As bank ity of the machines. ing laws continue to perm it more lati • Will a bank’s image become more tude in services offered, fully staffed important as it seeks more market branches will be a necessity for many share through construction of a new banks looking for steady growth. building? Even though the pendulum did A bank’s image is formed only in swing somewhat toward the offering of small part by buildings, says Dennis m echanically o p erated services, it Martens, national sales manager/vice already is swinging back toward re president, Son Corp., Wichita, con new al of p e rso n -to -p e rso n re la N 16 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis tionships, he adds. There never has been and never will be a better way to sign up new accounts and negotiate loans than through a person-to-person relationship. P ro jectio n s have show n few er planned branches, says Mr. Martens, but banks will continue to position for market share. Services must continue to be located conveniently, which means more branches for banks that can afford them. The cost of opening and maintaining branches is a central issue today, he says. Bankers are looking for ways to keep costs down, so they can offer more services in more locations. • Will bankers increasingly adopt a retailer’s attitude about the profitabil ity of each square foot of floor space? Some will and some won’t, says Mr. W ilson. Aggressive and innovative bankers must be aware of the return per dollar regarding space. Concerns about the cost of operating a large building have convinced bankers that m odular m ini-bank stru c tu re s are practical. W hen expansion of such a building is called for, another module can be integrated into the facility at reasonable cost. Bankers are adopting the retailer’s attitude about profitability of floorspace cost, says Mr. Martens. The re sult is that Son Corp. is being asked to build larger sectional buildings than was the case formerly. Customers like the lower costs associated with modu lar buildings — not to mention the fast delivery of such structures. Modular construction techniques allow for qual ity construction at lower cost — which is essential for branch success. • • Below are two examples of modular finan cial-institution structures manufactured by Son Corp., Wichita, Kan. At left is head quarters building of new Northwest Bank of Winnebago County, Rockford, III. At right is St. Joseph, Mo., branch of Home Savings, Kansas City. Both structures are three-section modular buildings. MID-CONTINENT BANKER for October, 1984 / V IV E R E / EST > fC OGITAR E Sessio n Dates: June 2 -1 4 , 1985 The Continuing Tradition of Excellence Since 1935 ABA’s Stonier Graduate School of Banking has excelled in providing the best available education and training to bankers nationwide. Stonier’s reputation rests solidly on its superior faculty and an innovative curriculum designed by experienced bankers and academicians. We prepare students for upper level man agement careers in the banking industry. A Stonier diploma is your mark of achievement in the banking industry. You can be a part of the continuing tradition by enrolling in the 1985 academic session. For an application or more information sqnd in the coupon below or telephone the ABA Banker Education Network (“ BEN” ) at (202) 467-6738. YES, I want to receive more information on the 1985 session of Stonier Graduate School of Banking. Please send an application and informational brochure to: N am e_______________________________________________________________________________________ State Return coupon to: Sunye Kw on Stonier Graduate School of Banking American Bankers Association 1120 Connecticut Avenue, N.W. Washington, D.C. 20036 MID -CONTINENT BANKER for October, 1984 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Zip AMERICAN BANKERS ASSOCIATION Another Service of the American Bankers Association HIJK 17 New Concern About Bottom Line Prompts Bankers to Seek Help When Planning a New Facility By Robert W . W illiam s, V ice President, Design-Build Concepts, Atlanta N OUR BUSINESS, you can’t get through the week without being rem inded that “bricks and m ortar are no longer the answer.’’ Philosophical ly, it’s difficult to argue with that state m ent, but it surely doesn’t tell the whole story. If there is a new wave in the finan cial-building world, it’s that concern about spread and the bottom line have brought bankers to exercise even more restraint in their expansion programs and to increasingly seek the help of specialists in th e field of financial buildings to be certain they build the I self-im age th a t m ake each bank unique. By contrast, stale-dated ’60s build ings still abound, bursting at the seams as a result of the phenomenal recent growth of deposits and activity. If there is a trend in financial housing, it’s the ongoing expansion, remodeling, upd atin g or re p la c e m e n t of these main-office facilities. D epending on w h e th e r th e location is right and availability of adjacent land on which to grow, the prudent course often is rehabilitation and upgrading of the old main office to ready it for the expected waste unless it can be productively rented out and become a paying asset until needed for bank operations. Branching is another facet of finan cial building that frequently is a topic of conversation these days. There un doubtedly will be fewer full-service bank branches on the drawing boards in com ing years for a n u m b e r of reasons: Branch systems are in place, essen tially, in many markets. The 1970s saw an unprecedented — and sometimes excessive — num ber of full-service locations put in place to serve almost every possible area of the marketplace. Mergers and acquisitions are creating surplus facilities w herever involved in stitu tio n s had c o m p etin g b ra n c h offices in the same service areas. ATM networks are expanding as rapidly as the hardware can be m anu factured. Even in rural, smaller m ar kets, where it was once assumed peo ple w o u ld n ’t w ant to deal w ith a machine, usage is far exceeding ex pectations. ATMs sometimes are an acceptable substitute for a manned, full-service facility. 1st SECTION UNDER CONSTRUCTION most useful and cost-efficient pro grams possible, while m eeting budget objectives. On the other side of the coin, a bank is not just an idea; to the public it’s a place. W herever you travel, the bank almost always is the best-built, most a ttra c tiv e and m ost com m odious building in town. That perhaps is as it should be; few people ever described a Sears store or a brokerage house that way. Bricks and m ortar, Indiana lim e stone or glass and steel, the building is much of the image and message the public can perceive and relate to. Bright and light, fresh and friendly, comfortable and convenient; these are all positive images for the bank of the 1980s and ’90s. Dignified, traditional, colonial and impressive are positive images, too, in their rightful place. These are the matters of marketplace, environment, personal preference and 18 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis activity of at least the ensuing 10 years as projected. Often the demise of downtown, re location of traffic and commerce due to new roads or other factors make it clear (after thorough study) that the bank should m ove and b eg in anew . Whichever alternative is indicated — add-on or start fresh — this opportu nity for choice will face many banks in the near-term future. While many of the present mainoffice structures have served for 15 or 20 years or longer, it generally has be come the practice to plan facilities just 10 years out, but, if possible, to plan ahead for additional expansion when needed at the end of that time. Most of us who advise bankers on these matters agree that it is poor poli cy these days to invest in fixed assets beyond a 10-year planning period. T h ere are b e tte r ways to em ploy funds, and excessive empty space is a Two-phase construction was undertaken by Design-Build Concepts, Atlanta, when enlarging Farmers & Merchants Bank, Foley, Ala. Bank operated in existing struc ture until new portion was built. It then moved into new portion while original building was reconstructed. Bank's de posits grew by $15 million while phase planning was under way. But in spite of all this, the fullservice branch office that can success fully transfer activity out of the main office or that enters and captures a new market for the bank is a viable — and more than justifiable — venture, and such facilities will continu e to be needed. ATMs can be im portant in serv in g cu sto m ers and e x ten d in g hours, and they are a com petitive weapon in the fight to hold market share, but they cannot capture a new market for the bank. A well-placed, w e ll-m a n n e re d and in v itin g fullservice branch can capture a new mar- MID-CONTINENT BANKER for October, 1984 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis to improve my earnings?” Bob: ‘‘That’s right, if our review indicates there’s some opportunity. And at no risk to you .We’ll work with your managers onfinding better solutions to float management, retail banking, consumer, commercial and mortgage lending, strategic planning, and a lot more. We’ll put it all togetherfor you. Organize it, plan it... deliver it.’’ Ed: ‘‘Andyou think you can increase our earnings?’’ Bob: ‘7 ’m sure of it. But remember —if we don’t, it’s our loss —not yours.’’ Ed: ‘‘Then how do you people make money?” Bob: ‘‘We come through a lot, for banks and savings & loans of all sizes, and ourfee is based on how much money we save you thefirst year. It’s the classic winwin situation!’’ Ed: “ Well, lately, I haven’t been able to win for losing.’’ Bob: ‘‘Ed, you can ’t lose with BEI. Call for an appointment and ask about the full range of financial services available through BEI Holdings, Ltd. —including Bank Earnings International, Bank Earnings Systems, BEI Software, Electronic Banking, Inc., and BEI Investments, Inc. BEI Earning our place in the financial community Atlanta/Dallas/San Diego 3420 Norman Berry Drive, Suite623, Atlanta, Georgia 30354, (404) 768-5689 ket. I t’s not uncom m on for a new branch to develop its own deposit base rivaling that of its main office. The key to successful branching is competitive strategy and cost-effectiveness against a profit-center measuring stick. The nuts and bolts of banking are ever-changing and nowadays require that the designer/planner of a bank facility be well acquainted with hard w are d ev elo p m en ts as th ey com e along. The bank now is a network held together by various means of elec tronic communication, and all of this must be programmed into the areas affected during design. Some of the promised benefits of electronic data processing finally are being realized; we would expect that the traditional bookkeeping/proof force will continue to diminish in size and fewer people will be needed in the back room, re quiring less space. The checkless soci ety foreseen in the 1960s has not ar rived, but the hardware developed for processing items has had its impact and will continue to have it. Special groups are receiving atten tion in the planning of physical facili ties. Areas specifically for savings — CDs and similar investm ents — are frequently planned to provide these Kuhlmann Appoints Two ROSENBERGER MILFELD Kuhlmann Design Group, Inc., St. Louis, has appointed Patricia Rosenberger per sonnel administrator and Susan M. Milfeld interior designer. Ms. Rosenberger joined the firm in August, 1983, and also serves as assistant accounting supervisor. Ms. Mil feld went to the firm last November. customers the privacy and comfort the personal nature and size of the transac tion demand. Senior citizens’ special needs are being recognized along with their in creasing weight in the population and their importance as a separate market. They sometimes are afforded a special area to make their visits to the bank especially convenient and com fort able. Younger V.I. P. s have come in for similar attention by a few banks and a special area with key-card entry allows these im portant customers to visit and relax in a club-like atm osphere while secretaries handle their bank transac tions. The only certain trend in bank plan ning and design, and the resultant buildings, is that there always will be change; an industry that changed little for several decades now seem s to thrive on change. A bank is still a place that’s bustling with activity and buzzing with new ser vices and ideas. And, large or small, new or refurnished, contemporary or traditional, the structure to house this activity remains a vital working part of the adventure. • • Bank-Planning Aid “ Planning Fundam entals for Financial Institutions” is the title o f a 24-page brochure published by M os ier. The brochure discusses site selec tion, site planning, building design, customer service/operations, ATM provision and building dimensions and standards. It in cludes several referen ce sketches featuring site plans for buildings. Author of the brochure is John Barry Smith, financial facilities designer/consultant for Mosler. For a free copy, write: Mosler, Hamilton, OH 45012. 20 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis MID-CONTINENT BANKER for October, 1984 Technology And Its Effect O n Bank of the Future custom er service: limited financial ser NCE C O N SID ER ED staid and vices perhaps customized to local m ar conservative, the financial in By Robert P. Barone ket segm ents. T hese n eed not be dustry is one that practically overnight Senior Vice President/Sales m anned full-tim e — only specific — within just the last decade or so — Diebold, Inc. hours or days — and generally routine has become a dynamic arena where Canton, Ohio transactions are automated. change is routine. At the heart of the The branch of the future also p re revolution is technology, which con sents requirem ents in terms of design. tinues to be both the stim ulus of, Multi-section buildings will become as well as the response to, myriad restructured to reduce operating costs changes. and attract new, non-transaction rev increasingly popular because they are enue sources. Lobby automation can expandable and relocatable. Variations O ther trends also have contributed to massive change in structure and op maximize the combined efficiencies of are quickly and easily constructed to erations of financial institutions, in technology and human tellers. Branch m eet re q u ire m e n ts of nearly any cluding the role of manned branch fa personnel then are reoriented from branch-office location: 1,200-squarecilities. D eregulation has escalated transactions to sales, and various finan feet limited-service satellite branches; competition, as virtually any type of cial services can be customized to spe m ini-branches w ith 24-hour au to mated service, along with one or two organization now can offer financial cific targeted market segments. services. Banks, too, have non-branch As need is docum ented for addition m anned positions; remote-transaction alternatives for delivery of service and al facilities, strategic construction of facilities with an off-premise ATM and are finding ATMs in retail locations to new branches will contribute to ex after-hour depository; and even auto be especially profitable. p an d e d m arket share. C onsum ers mates to enclose outer-lane ATMs. Functionally, too, the branch of the Consumer attitudes have been a ma have been especially responsive to the future may include specific modules. jor force in changing the role of the “hub-and-satellite” branch concept. branch facility. W hile personalized The “hub, ” strategically located within The sales center, now the platform service once was th e prio rity , in the m arket area, offers specialized area, would include financial counse creasingly busy consumers now d e financial services, which may include lors or relationship bankers, oriented mand convenience above all and ready stock brokerage, insurance, estate to sales and custom er service. This access to funds 24 hours a day. planning, etc. It provides centralized area also requires administrative ter Changing economics definitely has back-room processing support, while minals, a hard-copy printer and a time/ impacted the role of the branch facil serving as the communications link date clock for taking teller transac ity: While productivity has declined or with satellite branches and controlling tions. If teller lines are needed within the rem ained constant, operating costs off-premise ATMs. have increased. And the cost of the The emphasis in “satellites” is on the service-teller area, various teller func actual funds has been on a steady rise. provision of the most cost-effective tions can be supplem ented by autoThe progressive financial institution will turn to alternative strategies — m ore co st-e ffe ctiv e and m ark e toriented. First, automation is key to reducing labor costs and boosting pro ductivity. Routine functions — for ex ln-lobby ATM access provided at ample, cash dispensing and simple de posits — can all be automated, particu Chase-Lincoln First Bank, Rochester, larly in high-volume situations. N. Y., for customers Branch configuration within a sys not needing services tem also can be altered significantly. of regular tellers. Retail financial services ideally should Bank has 92 lobby be presented to consumers from both ATMs, five of which branch and alternative delivery points. provide 24-hour ac Branches in close proximity can be cess to the bank's 400,000 card hold c o n so lid a te d , w h ile u n p ro fita b le ers. M achines branches are closed altogether — but photo are Diebold also offset with selective ATM and TABS 911 models. wimary Express Banki POS placement. Remaining viable branches can be O MID-CONTINENT BANKER for October, 1984 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 21 mated devices: modular teller counter system s; teller-assist cash-handling devices; special-function consum er self-services devices; and, of course, teller terminals. Lobby automation — ATMs along side live tellers — plays a trem endous role in increasing productivity while decreasing cost. Automating routine transactions reduces teller workload and places more emphasis on sales and customer service. Few er teller hours are required and lobby space can be reduced or allocated to new financial services. New, low-cost ATMs easily can be cost-justified by teller displace ment, even at low ATM transaction volumes. Placing ATMs in branch lob bies also will encourage usage by first time or infrequent users — in part b e cause a familiar environm ent is less threatening. Future branches will include a num b e r of co m p lem en tary , functional areas beyond the actual branch lobby. The 24-hour transaction center will in clude a walk-up ATM — with intercon nected after-hour depository service — in a vestibule. Plate glass for secur ity, with a retail-store appearance for promotional purposes, the vestibule will be secured with access control and m onitored by video surveillance. Drive-up service can include dif ferent options to suit the needs of var ious custom ers. M ultiple drive-up lanes m anned during regular hours by a single teller maximize consum er speed, convenience and teller produc tivity. The outside lane houses a 24hour drive-up ATM — perceived by customers as extremely safe and con venient — which also can include the in terc o n n ected after-hours deposi tory. The in-lobby PIN system can even be extended to the drive-up unit to ensure positive customer ID. A financial institution m ust inte grate both branch and non-branch alternatives for successful delivery of financial services. Time and conven ience will continue to be top priorities for consumers, who dem and financial service delivery at home, work, shop ping areas and en te rta in m e n t and tra v e l lo cations. S erv ice -d eliv ery strategy must take into account special demands of narrow consumer market segments. A system with integrated elem ents will provide a migration path to im proved consum er convenience and cost savings by shifting the burden of transaction volume off-premise. Future emphasis will continue to re volve around the debit-card, and exp an d ed -serv ices delivery will add v alu e to th e s e cards. C o n su m e r acceptance of debit and credit cards is 22 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis significant: In 1983, more than 3.4 bil lion transactions were perform ed on more than 40,000 ATMs, and more than 100 million debit and another 100 million credit cards are in circulation. Consumers will continue to demand additional transactions of value via credit and debit cards. Growth in n et works and shared-card bases will b e come increasingly attractive to retail ers, and both financial institutions and retailers gain access to new profit opportunities via ATM-fee income. Financial institutions and retailers jointly will provide incentives for cus tom er use. Delivery of financial services has entered an exciting, new era of high tech. An inte g ra te d , fle x ib le and w ellplanned system will be the passkey. F in a n c ia l-d e liv e ry system s in creasingly will p rovide additional transactions of value for consumers: fuel delivery, electronic couponing, ticketing, paym ent term inals, elec tronic marketing, scrip issuance and even governm ent-benefits distribu tion. Sharp competition among retail ers has resulted in current concentra tion of placement of ATMs and other autom ated devices in supermarkets, gas stations and convenience stores. ATMs in retail locations offer a num ber of benefits to all involved — con sumers, merchants and financial in stitutions. For consumers, obvious b e nefits are convenience, time savings and 24-hour access to funds. For retail ers, benefits include custom er service and convenience; enhanced image; in creased traffic flow; revenue-sharing opportunities; and reduced check loss es. F or financial in stitu tio n s, retail ATMs reduce “per-transaction” costs; provide enhanced, progressive image and card-holder convenience; offer an attractive source of fee income; and bridge the transition to point-of-sale. Point-of-sale, although often re ferred to as a location, is, in reality, a concept that is a natural part of the financial-services delivery system. It comprises a num ber of functions and descriptions: credit-card authoriza tion, paperless draft capture and elec tronic transmission; and acceptance of debit cards. It also may include traveland entertainm ent-card authorization and draft c a p tu re ; p a p e r-b a se d transaction authorization as a guaran tee for checks; and electronic transmis sion for electronic credit-card transac tions. For the financial institution, pointof-sale lowers “per-transaction costs and enhances card value. Particularly for early adapters, there are significant competitive advantages and increased fees from other card issuers. Losses and chargebacks are reduced, and overall m arket expansion is accom plished without brick and mortar. Merchants can reap equally attrac tive benefits from point-of-sale. POS increases store traffic and sales, speeds transaction th ro u g h p u t and allows m ore assured, sp eed ier paym ents. Paperwork and credit losses are de creased and the need for both on-site cash and proprietary cards is greatly reduced. Consumers, too, benefit from pointof-sale. Shoppers need to carry less cash and find plastic cards easier to use. Customers can receive discounts based on POS use and can better con trol their own funds through receipts and statements. Although point-of-sale offers count less advantages over cash and credit, there remain a num ber of issues to be addressed. Custom er base and card holder penetration must be sufficient. Who maintains control over the cus tom er and the POS system itself? How are equipm ent and com m unicating lines costs allocated? Obviously, the traditional role of financial institution and merchant is changing rapidly, and financial-delivery systems will con tinue to evolve for a long time. In rounding out a com prehensive services-delivery system , we m ust give careful consideration to electron ics-systems integration, for flexibility and continuity among devices and ap plications. A multi-application proces sor, for example, concurrently sup ports multiple applications in multiple locations and can provide energy man agement as well as customized applica tions. Centralized-security monitoring and control are especially im portant at unm anned facilities. Delivery of financial services has en tered an exciting, new era of high tech. An in te g ra te d , flexible and w ellplanned system will be the passkey. David Huiskens has been named assis tant vice president, Comerica, Inc., Detroit. At Comerica Bank-Detroit, Richard A. H ernquist was elected vice president, trust investment. Named assistant vice presidents were: Russell A. Fisher, funds management; Dennis Mitzel, trust tax; and Louis A. Zedan, corporate financial services. MID-CONTINENT BANKER for October, 1984 Banks that are too sm all for professional personnel m anagem ent probably won’t get any bigger. Can a bank which expects to grow in size and influence in its com mu nity do so with employees who are left to do the best they can at their jobs without sensitive supervision and motivation? We don’t think so. And that’s why Union National Bank has created a personnel consulting agency to help other banks establish the professional personnel programs so vital to successful bank manage ment. We provide written programs and thorough personal training for your representative which covers all aspects of personnel administration, including personnel policies, perfor mance evaluation, employee selec tion, supervisor training and behavior modification. Call Joe Zegler or Linda Reh at 501-378-4257 or toll- MID-CONTINENT BANKER for October, 1984 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis free in Arkansas 1-800-482-8450. Or write to Union National Bank Per sonnel Consulting Agency, P.O. Box 1541, Little Rock, Arkansas 72203. Union Personnel Consulting Agency 23 'Local Contractors Didn't Understand Us' Friendly, Personal Feeling Retained When Bank Builds Modern Structure O BETTER serve existing custom and they don’t feel comfortable with ers and attract the kind of growth that big-bank or big-business feeling. management wanted, Guaranty Bank,W e had worked hard to build a warm, Mt. Pleasant, Tex., needed a new facil personal relationship with these peo ity. ple, and our new facility had to make The question was, Could the bank them feel welcome.’’ keep its friendly, personal feeling The new site posed several chal that’s so important to a locally owned, lenges because of its limited size. It com m unity bank w hile building a had to accommodate six retail and one modern, efficient structure with deliv commercial drive-up lanes, with room ery systems geared to the future? for future expansion. Separate areas G uaranty’s existing building was for customer and employee parking, ideally located on the town square, but pedestrian traffic and easy access from after remodeling five times in the past the busy thoroughfare on which the 12 years, the bank had simply out building was to be positioned were all grown the facility. required. In addition, bank officers “If we intended to keep growing,’’ wanted to locate all customer facilities says Jonice Crane, executive vice pres on the first floor. ident, “we needed a new building with “W e’d worked with local contractors modern work stations and an efficient in the past,” comments Mr. Jones. work-flow system .’’ “They didn’t understand us, and they A site one block away from the town really didn’t know much about bank square was acquired, but officers were ing. This time, we wanted someone concerned about m oving from the who did. We selected Bank Building high-visibility location on the square. Corp. (BBC) because it had the experi They w anted a new building that ence to help us make the right deci would not only provide needed effi sions. BBC had designed our original ciency and co n v enience, b u t also building in 1954, so we knew the value would maintain a high profile in the it adds to a banking office. ” community. Based on a comprehensive market “We get a lot of good, ordinary peo study, BBC proposed a 30,000-squareple in here, ’’ explains Bill Jones, chair foot building with commercial-service man. “They’re farmers, m erchants, space separated from retail. The basic laborers, small-town family people — concept was to provide strategically T Commercial custom ers at new building for Guaranty Bank, Mt. Pleasant, Tex., have own entrance, shown at r. Entrance for retail customers is at I. Bank Building Corp., St. Louis, handled project. 24 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis zoned areas in a “bank for the future” so that the facility would make it easier for bank personnel to treat special cus tomers in a special way. Initially, bank officers felt this plan was larger than their immediate needs would require. However, BBC p er sonnel counseled that bankers should expect a growth surge on completion of the new facility since it was designed to make their customers feel at home — while giving increased service flexibil ity. And that’s the way it turned out. “We couldn’t be happier with our new b u ild in g ,” says M r. Jones. “Guaranty had good growth over the prior 10 years, but after opening our new offices, our growth became even more im pressive.” “In the two years since our facility opened,” Mr. Jones comments, “our assets have grown m ore than 26% annually, going from $80 million in 1982 to $122 million in mid-1984. We hadn’t realized how im portant a facility can be in marketing banking services. “The design of the facility really works. Bank Building’s idea to sepa rate commercial from retail services lets us give every customer V. I. P. treatm ent. It has eliminated long lines for our retail customers, and our com mercial custom ers really appreciate the special trea tm e n t we now can offer. And everyone appreciates the covered drive-ups suggested by Bank Building.” The building’s interior is a model of efficiency. All tellers (lobby, drive-up and commercial) have direct access to the cash vault, which means no money pouches have to be carried through public areas. All service areas are ac cessible to a central corridor and are color coded to direct people to specific areas. Guaranty’s m anagement people had wanted a feeling of openness and infor mality in the new facility, and they wanted it designed so the service area could take care of all transactions and operating functions on the main floor. H ow ever, they specifically w anted loan officers and new-account people to have separate offices to provide the privacy they felt was essential in a MID-CONTINENT BANKER for October, 1984 Fremont saves more than tim e or m oney Earl F. McNaughton President The First National Bank of Fremont S in ce we began using our F R E M O N T S O F T W A R E program and the IBM System /36, the chang e has been dram atic, and an im portant factor in our growth. We can m ake better m anagem ent d ecisio ns, because we have valuable inform ation at our fingertips. T h e program m akes better use of our time and money. It gives us a system w hich we com pletely control, at a fixed volum e cost — and on dem and. It allow s us to do a better job with our custo m ers by giving them more time and account inform ation on-the-spot. T h e menu concept by custo m er nam e is very sim ple for our tellers to learn and understand. T h e Co m puter enables us to know A L L the facts. We have a num ber of things on the system that m any larger banks do n’t have. And, we are prepared and more responsive. F R E M O N T S O F T W A R E has been proven in-house to su c ce ss fu lly meet the needs of good banking. For more inform ation, call or write Doug Barton, vice-president DR 219-495-9135. “from one bank to another” Value Added Remarketer System/36 MID-CONTINENT BANKER for October, 1984 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis FREMONT SOFTWARE The First National Bank of Fremont • P.O. Box 666 Fremont, IN 46737 Phone 219-495-9135 25 small, closely knit community like Mt. Pleasant. “We wanted a bank for the future,” says Mr. Jones, “and we got even more than we bargained for. The marketing leverage we’ve gained from our new segm ented facilities gives us a big advantage over our competition. Now, we can offer our most desirable cus tom ers individualized services that wouldn’t be possible without this seg m ented approach. There was no com promise, either, in the design — we didn’t have to sacrifice present needs for future considerations. “Bank Building’s people were ex trem ely sensitive to our needs and cer tainly listened well. They were able to interpret our feelings and needs into a design that works for us and our com munity. It will continue to work for many years to com e.” • • • The Central Commercial Finance Division of W alter E. H eller & Co., Chicago, has elected Michael J. Litwin president and William E. Andrzeicik marketing-services manager. Mr. Lit win, formerly senior vice president, joined the firm in 1971. TRUST PROCESSING FOR MICROS • A complete accounting and reporting package • In-house control gives you immediate access to vital information and reports • Fully automates Asset Management • Complete audit trail • Automatic pricing of securities • Controlled Tickler System • Generation of the Annual FFIEC Report of trust assets • Excess Cash Account — excess prin cipal and income cash from indiviual trusts can be transferred in and out of one interest bearing account • Automatic distribution of interest and dividend checks For further information, write or call.... CFG, Inc. 700 East Ogden Avenue Westmont, Illinois 60559 ( 312) 986-1006 1-800-248-0400 26 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Three Goals Set by Commerce Bank For Building Now Being Erected H E office building C om m erce Bank is erecting in downtown Kan sas City has three goals: 1. To create a new building that would exemplify the highest level of quality. 2. To provide a strong identity and centerpiece for downtown redevelop ment. 3. To link the structure with the Com m erce Trust/C om m erce Tower buildings. The site for the Commerce Bank Building, between W alnut and Main and 10th streets, is at the heart of Kan sas City’s central financial/retail dis tricts. The major entrance, to be high lighted by a landscaped plaza, will be situated at the corner of W alnut and 10th streets, with a cascading fountain enhancing the entry plaza. A pedestrian bridge over 10th Street will provide a continuous enclosed walkway linking the new structure to the Commerce Trust/Comm erce Tow er buildings. A portion of the walkway will be devoted to a public gallery for display of Commerce Bank’s art collec tion. The walkway will continue south past the entrance lobby of the new structure to join a new retail arcade developed immediately south of the Commerce Bank Building. Roofed by a barrel-vaulted skylight, the arcade will become a through-block connec tion between Main and Walnut. Provi sion has been made to extend the walk way southward to the proposed new AT&T developm ent between 11th and 12th streets. Potential retail/commercial uses in the arcade include distinctive res tau ra n ts, fine specialty shops and boutiques. Design of the 19-story Commerce Bank Building is a strong departure from the rectangular towers that have dominated big-city architecture over th e past several decad es, a bank spokesperson points out. The shape of the building has been cut away and faceted at the corners, with the pent house rising in steps to a pinnacle at the copper roof. Corner setbacks on the 10th Street facade will allow broad er glimpses of the building from sur rounding streets and will open up views of the city for those in offices in the building. This unique building configuration will provide 10 corner offices per level. T The steep slope of the site will p er m it building entrances at both the Main and W alnut streets levels. An escalator, incorporated in the retail space, will link the two lobbies. The Main S treet level will be devoted largely to building services. The Wal nut Street level, which will encompass the main-office-building lobby, will provide approxim ately 15,000 n et square feet of space for retail and/or commercial development. The typical office floor will have 24,390 gross square feet of space, with an average office-floor efficiency of 87%. Designed for multiple- or single tenant occupancy, the floors will be laid out on an adaptable five-foot build ing module. Access for com puter ca bling and hookup to chilled water for cooling of com puter installations will be provided on every floor at several locations. Eight passenger elevators, divided between a low-rise and highrise bank, and a separate service eleva tor will serve the building. The building’s base will be a rich, polished granite. Granite aggregate precast of a warm rose hue will be used for the tower, with the top office level (Continued on page 34) This is artist's sketch of new Commerce Bank Building (taller building at left), now being erected in downtown Kansas City. It will be connected to present bank building (r.) by walkway over Walnut Street. New structure will feature shopping arcade (bottom left). MID-CONTINENT BANKER for October, 1984 N othing Reaches "four Financial M arket Like U nited States Banker ed States Banker United States Banker Every banking institution with assets of $50,000,000 or more is covered. T h at’s 90% o f the market. Senior officers in commercial banks, sav ings & loan associations, savings banks, insurance companies, credit unions, invest m ent and finance firms all read United States Banker. The in-depth analysis of current financial issues makes U.S. Banker essential reading for these leading ex ecutives. For a complete m edia file, or for a per sonal subscription, return the coupon or call Peggie Heidel at (203) 661-5000. MID-CONTINENT BANKER for October, 1984 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Servii»! II Financial Institutions Since 1891 ------------------------------------------------------------------------- 1 EH EH Please send a media file and current issue. Enter my subscription—One Year $24 (20% saving). Name ___________________________________________ j Title_____________________________________________ ! Company_________________________________________ J Address _________________________________________ | City__________________ State__________ Zip__________ I Telephone _______________________________________ ! Return coupon to: United States Banker | One River Road, Cos Cob, CT 06807 ____________________ 27 Bank CEO s Can Rest Assured While Computers Watch Bank NERGY crises d o n ’t get m uch front-page space in newspapers these days, but because bank profit The building manager cred margins are caught in the vise of in its a new system with helping creased com petition, bankers must continue to monitor building energy cut energy use by 3 4 % , an costs carefully. achievement that won the bank Threats from crim e and fire are an award from the Edison Elec other concerns that probably cause bankers sleepless nights. Bank CEOs tric Institute. at least would rest a little more easily knowing th eir bank facilities w ere being operated at maximum energy the heating equipm ent to re q u ire efficiency and they had some control ments of the four seasons. A season’s over the upward spiral of insurance history of heating dem and serves as premiums. the basis for the program that will run Security First National, Sheboygan, the heating eq u ip m en t during the Wis., has turned its energy-efficiency same season the following year. concerns over to a tireless and relent D eveloping software to run the less watchdog. Not only does this heating and ventilating equipm ent to watchdog monitor floor tem peratures m eet Security First National’s special throughout the 65-year-old, 112,000- n eed s does not m ean M r. Von square-foot bank building 24 hours a Rautenkranz had to have extensive day, seven days a week, it generates a programming experience. The system complete history of energy expendi is self-prompting and user friendly, he tures, sounds alarms if dem and ex says. ceeds peak levels, turns lights on and The new system permits a high de off as needed and adjusts heating/ven- gree of fine tuning that previously was tilating equipm ent for optimal effect. impossible with the bank’s old, nonB u ild in g m an ag er C a rte r Von automated system, according to Mr. Rautenkranz quite obviously is happy Von Rautenkranz. The Security First to have an energetic, energy-conscious National building — like most older worker like the Power Perfect/5000, buildings — retains heat on the middle designed by Johnson Controls, Mil w aukee, on his team . M r. Von Rautenkranz credits the Power Perfect with helping cut energy costs at Secur ity First National by 34%, an achieve m ent that earned the bank an award from the Edison Electric Institute this year. The best thing about the Power P er fect is the history it provides of build ing-energy consumption, according to Mr. Von Rautenkranz. The system was installed two years ago, and Mr. Von Rautenkranz has developed a seasonal history of building-energy re q u ire ments. The system maintains records on a daily, monthly or yearly basis, and Mr. Von R au ten k ran z easily produces energy-use reports for management to document gains in energy efficiency. He has developed software that adjusts E Digitized for 28 FRASER https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis floors longer than it does on the lower and u p p e r floors. N orm ally, this means personnel on the middle floors bake while people working on the up per and lower floors wear sweaters to stay warm. Mr. Von Rautenkranz is able to ad just tem peratures now so that person nel throughout the building remain comfortable throughout the day, no m atter the season. The system is pro gram m ed to note und erh eatin g or overheating problems and automati cally make adjustments, but if neces sary, Mr. Von Rautenkranz, or a m em b er of his staff, can m onitor floor tem peratures on a com puter terminal and adjust the heating system manuallyY “W e don’t get many com plaints these days from people who say the building is either too hot or too cold,’’ he says. Controlling energy costs in winter in frigid Wisconsin is tough, Mr. Von Rautenkranz says, particularly with an older building such as Security First National has. The January winds “just seem to suck the heat right out of the building,’ he says, and heating costs can get out of hand if not closely moni tored. The Power Perfect is more than just a watchdog over energy costs, howev er. It’s also a night watchman, turning lights on and off throughout the build ing and a d ja c e n t e x te rio r areas. Formerly, the bank’s yard lights were controlled by time clocks that had to be reset every two weeks or so to adjust to shifts in the timing of dusk and dawn. Power Perfect’s electronic eyes now m easure daylight, and the system turns yard lights on as darkness d e scends and off again at the crack of dawn. Corridor lighting is turned on and off automatically to conform to the bank’s business hours, and the system even takes weekends and holidays into account. Mr. Von Rautenkranz has yet to put the bank’s air-conditioning unit on line so that it, too, adjusts to the sea(Continued on page 44) MID-CONTINENT BANKER for October, 1984 They made one call, now they’re making money. When it comes to lease operations support, First Lease does what they say they will.” Doug Steele Executive Vice President Planters Bank & Trust Hopkinsville, KY “When we ran into a problem, First Lease came up and solved it.” “First Lease is an expert in helping put together participation /eases.” Dan Fehrenbach Vice President Bank of Western Indiana Covington, IN One phone call was all it took to get these bankers started on a profitable equipment leasing path. That call led to a meeting. At the meeting, we showed them how we’ve helped banks across the country operate profitable, inde pendent leasing departments without a major investment in start-up and maintenance. We also explained that we work on a fee basis, so that leasing profits stay where they belong .. . with them. Who answered their call? Who helped them with not only the start-up, but with the follow-through? First Lease. Listen to what they have to say: Doug Steele: “ First Lease is one of the few companies I’ve run across that lives up to its advertising. They’re there when we call. They’re competent, knowledgeable, and friendly. Their service is consistently good.” Dan Fehrenbach’s bank wasn’t getting its share of the farm equipment leases in western Indiana. Dave Flockett Jack Casada Vice President First Bank & Trust Co. Mt. Vernon, IL of First Lease went with Dan to see the problem dealers. Says Dan, “ Dave showed the dealers how our bank could leqse their equipment to farmers for them without the dealer having to put any money up front, and without any continuing liability. We get a lot of their business now.” Brian Griffin says his experience with First Lease has been good from the start, adding “ First Lease really knows equipment leasing.” Jack Casada says First Lease arranges lease participa tions when needed “We call all the shots, though, and our customers don’t even know First Lease is anywhere around.” Isn’t it about time you looked into the high profits of equipment leasing? To get the ball rolling all it takes is a call to Jan Gerdom at 502/423-7730. The men pictured above called. Now they’re making money. FirstLease AND EQUIPMENT CONSULTING CORP. 420 Hurstbourne Lane ■Louisville, KY 40222 502/ 423-7730 MID-CONTINENT BANKER for October, 1984 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 29 Demography Dictates Move Bank in Missouri Makes 'Statement' With New Headquarters Building analysis indi Maurice “Moe” Sandfort, president/ cated a continuing w estward CEO, who joined the bank three days m ovem ent of business and people after the new building opened. away from the central business district “We feel that our building makes a in Cape Girardeau, Mo. Officials of the statem ent about the future of the west centrally located C enterre Bank in the end and the quality of construction com m unity had to choose betw een that will go in h ere,” he says. modernizing their existing facility or Mr. Sandfort emphasizes he was not “making a statem ent” with a new head involved during the planning phase of quarters building near the west-end the construction project, but is more development. than satisfied with results of that plan The decision was made a few years ning. Richard Swaim, a banker of more ago, and when C enterre finally opened than 30 years’ experience who retired its new west-end building last autumn from the bank’s vice chairmanship last two blocks from the shopping mall that year, oversaw the project and even initially trig g ered develo p m en t in assisted in planning the office and lob western Cape Girardeau, there could by layout used by the architects. be no doubt among bank employees or C e n te rre could have chosen to the community at large that C enterre maintain its downtown headquarters had chosen to “make a statement. ” Site facility while building a smaller facility selection, architectural design, con in the west end. The bank could have struction standards and interior decor relocated to the shopping center itself all spoke more than m ere words could rather than building on an em pty tract about the bank’s commitment to the of land some distance away. Both w est en d of th e com m unity, says courses of action would have sent out D e m o g r a p h ic the wrong signal, says Mr. Sandfort. C enterre did not want to submerge its identity into that of the shopping center, but did want to dem onstrate to the rapidly developing west end that the bank would be a perm anent fixture on the local landscape. The new build ing, with its clean, modern lines and its welcoming interior, achieves that goal, says Mr. Sandfort. “If anything speaks well for the building, it’s that staff and customers tell me the building seems to help peo ple talk to one another,’’ he says. Among his goals as president of the bank is encouraging em ployees to greet customers rather than forcing the customer to initiate conversation, says Mr. Sandfort. In fact, if he could change anything about the layout of the lobby, it would be to get a desk placed closer to the doors so that some one from the bank always would be there to greet customers as they enter, he says. The bank’s current layout and at mosphere are so comfortable and invit ing, however, that people are encour aged to communicate, he says. C en terre continues to use its downtown facility as a branch, but currently has no future plans for expansion, accord ing to Mr. Sandfort. The new building should be adequate to m eet the bank’s needs for m any years desp ite the growth expected in the west end, he says. That growth already is evident in areas adjacent to the once empty land on which C enterre’s new building was constructed. “As I look out my window, I can see mostly farmland and the highway,’’ says M r. S andfort. “ Since w e ’ve opened, th ree new buildings have opened nearby. Our feeling is that in another five years, I ’ll be able to look out my window and see more buildings than farm land.” • • Spacious, yet inviting lobby of Centerre Bank, Cape Girardeau, Mo., was designed to help facilitate communication between bank representatives and customers. Architect was Kuhlmann Design Group, St. Louis. 30 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis MID-CONTINENT BANKER for October, 1984 j§>ometl]mg ¿ISrtusual at (Eijestjtre ,31mt Sc ^aitng i, ^ o c a tto n C entrally located, on the edge of C la yto n ’s business d istrict by Forest Park. 6 m inutes to downtow n St. L o u is, s p o rts and to u r is t a ttra c tio n s . Highw ay 40 and Clayton Road. Convenient to airport. Old English H ostelry, 108 elegant ch a m be rs—some canopy beds and period antiques. C om plim entary coffee & juice w ith wake-up. Four story concrete building, smoke de tectors in hall. Jfjcaturcs New co-ed health spa — sauna, w hirlpool & m ulti-station “ Isokine tic s ” equipm ent fo r adults only. 5 miles of jog g ing track adjacent to hotel. O utdoor pool. Award w inning, Old English “ Chesh ire Inn.” breakfast buffet, English special ties for lunch and dinner. Fox & Hounds and King’s Arms Pubs, nightly entertainment. j^ p e c ia lj^ m r ic e s Doubledeck English Buses take dinner guests to sports and theatre events. A chauffeur-driven Rolls Royce for special transport. ^ R atcs SWB $59.00 to $65.00 EP DWB $71.00 to $77.00 EP PLUS TAX ^Meetings Sc ^Banquets w e spe cialize in meetings for the V.I.P. who seeks traditional elegance. 20-30 people, ideal! Featured In C o un try Inns and B ack Roads 10% Travel Agents Commission Paid Promptly Toll Free 800-325-R-E-S-V except in Missouri 1-(314) 647-7300 6300 C L A Y T O N R D ., S T . L O U IS , MO 63117 MID-CONTINENT BANKER for October, 1984 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 31 With New Money-Processing Technology: Costs Are Reduced; Employee M orale up At Louisville Bank HEN officials at Liberty Na tional, Louisville, decided to support new money-processing nology in the coin and currency de partm ent, increased productivity, im proved employee morale and procure m ent of new accounts resulted. The $1.3-billion-asset bank current ly is using two cash-settlem ent sys tems, six new currency processors and a state-of-the-art currency-fitness sort er, all purchased from Brandt, Inc., Watertown, Wis. Liberty National’s coin and curren cy departm ent consists of eight com mercial-teller stations, two of which co n tain c o m p lete B ran d t cashsettlem ent systems. These systems are each comprised of a currency counter and a coin sorter/counter interfaced to a central-processing unit. C oin and c u rre n c y inform ation processed by the coin sorter and cur rency counter is transferred automati cally to Models 856 and 858 central processing units. This information, along w ith any in d iv id u a l check amounts, rolled coin and various other media that have been manually keyed into the central-processing unit, will be printed out in an audit-trail format, detailing and totaling all deposit data processed. Item ized also are differ ences between declared balances and actual processed totals. Rebecca L. Hasting, assistant vice president, is in charge of coin and cur rency operations for Liberty National. She explains that the bank processes the local post-office account, which is comprised of numerous envelope de posits. “We previously were utilizing the services of five tellers for four hours a day to process this account alone,” Ms. Hasting points out. “Since purchasing the systems, it takes only one to two W 32 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis tellers three hours per day to process this account. We have been able to use tech the services of the three remaining tellers to process new -account d e posits as the bank continues to grow. ” Ms. Hasting goes on to say, “We now can handle m ore com m ercial accounts due to acquisition of the cashsettlem ent systems.” Some of the other accounts proc essed include a large soft drink com pany, various v en d in g -c o m p an y accounts, bakery and dairy accounts. “If not for this equipm ent, we would have had to add staff; instead, we have maintained our current staff and are doing a superb job with the deposits, ” says Ms. Hasting. “Another big bonus,” she says, “is that we have seen the accuracy im proved, which, in a large part, is due to high employee regard for the systems. Tellers love the systems because the machines are doing the work for them. The systems have allowed each indi vidual to excel.” Four of the coin-and-currency teller stations include the Brandt Model 866 currency counter. This unit will count and batch up to 1,500 bills per minute. This unit can be equipped with a coun terfeit detection aid to identify suspect notes. Ms. H asting indicates th at Liberty National is happy with the curTOP: Liberty Nat'l, Louisville, uses two Brandt cash-settlement systems. Here, cur rency totals processed on Model 866 cur rency counter are transmitted to Model 858 central-processing unit. Rebecca Hasting (r.), a.v.p., says bank now can handle more commercial accounts because of acquisi tion of systems. CENTER: Liberty Nat'l processes currency on Brandt Model 866 currency counter, which counts and batches up to 1,500 bills per minute and can be equipped to detect counterfeit bills. BOTTOM: Brandt Model 885 currencyfitness sorter sorts currency to be used in Liberty Nat'I's automatic teller machines. Unit sorts according to 10 criteria at levels selected by bank to obtain consistent qual ity of currency. MID-CONTINENT BANKER for October, 1984 Attention B a n k C E O s How Does Your Bank “ Introduce” the New Director To His New Job? T H E N E W L Y E L E C T E D b an k d ire c to r p ro b a b ly seem s o v erw h elm ed w ith th e re sp o n sib ilities of his n ew jo b and th e com plexities of th e b an k in g system . So, y o u ’ll w ant to acq u ain t him w ith his “new c h a ir” as quickly an d as “g en tly ” as possible. Your bank u n d o u b te d ly has a portfolio of m aterial to h an d to th e new d irec to r. O u r in stru ctio n al folder, e n title d “B riefin g the N ew B a n k D ire c to r,” can b e a useful ad d itio n to y o u r in tro d u c tory m aterial. It is w ritte n by D r. Lew is E. D avids, e d ito r of T he BANK B O A R D L e tte r. “B riefin g th e N ew B a n k D ire c to r ’ pro v id es th e re c ip ie n t w ith an overview of th e d ire c to r’s jo b an d resp o n sib ilities an d also offers suggestions on “h o m ew o rk ” an d “re a d in g ” assignm ents th at will b rin g him quickly u p -to -d a te in his job. This 8-page folder co ncludes w ith w h at th e au th o r has te rm e d th e “20 C o m m a n d m e n ts for B ank D ire c to rs” startin g w ith T hou shalt not a tte m p t to u su rp p re ro g ativ es of m a n a g e m e n t,” and en d in g w ith “T hou shalt su b m it th y resig n atio n gracefully and w ith dignity w h en no lo n g er m aking a positive co n trib u tio n to th e b a n k .” F o r a F R E E copy of this folder, fill in th e coupon below . You’ll receive this plus o th e r info rm ation co n c ern in g th e bank d ire c to r s job th at can b e useful to him and, of course, to th e bank. f ------------------------------------------------------------------------------------------ | I The BANK BOARD Letter I 408 O live St., St. Louis, M O 63102 Please send m e a F R E E co p y o f “ Briefing the N ew Bank D irector” along with other inform ation about The BAN K B O A R D Letter. N a m e ____________________________ T it l e ----------------------------------------Bank ___________________________________________________ ___________ | Address _________________________________________________ —----------- I | City ____________________ S ta te ________________Z i p _______________ l- MID-CONTINENT BANKER for October, 1984 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 33 rency counters. “We process all the cash and food stamps that come through the coin and currency departm ent with the curren cy counters. Several Liberty branches utilize currency counters to verify cur rency shipm ents and process large volumes of cash and food stamps. We presently are evaluating the need for additional currency-processing equip m ent in selected branch locations. Another teller station is dedicated to the Brandt Model 885 currency-fitness sorter. The currency-fitness sorter is designed to sort money, producing a consistent quality of currency to be used in the bank’s 30 automatic teller machines. The Brandt Model 885 tests each bill according to 10 conditions; doubles, note length, holes, tears, corner folds, condition (crispness), missing corners, tape, counterfeit detection and “Z” folds. The currency is sorted against customer-selected sort levels as well as p red eterm in ed levels to determ ine which bills are fit and which are unfit to use in the ATMs. The fit money goes into the fit pocket while those bills not m eeting preset condition levels are sorted into the unfit pocket. Any sus pect notes, those that are long, too sh ort, doubles or co u n terfeit, are directed into the third or cull pocket. The Brandt Model 885 will sort and verify up to 16,000 notes per hour. This unit was purchased by Liberty National because the bank realized that much ATM downtime was due to currency-related problems. “Since we have begun automatically sorting currency with the Brandt Mod el 885, I have received only positive feedback as far as ATM downtime and quality of currency are concerned,” says Ms. Hasting. “Prior to purchasing the machine, much of the sorting was done m anual ly, which was a disadvantage since our tellers would sort by sight alone. Their sorting was totally subjective and would change from day to day. Now the machine sorts according to the 10 criteria at levels we select; we are get ting the exact quality of money we want. “Another important benefit with the fitness sorter is that we can reconcile while we are sorting. By verifying each strap at this stage, we are eliminating a lot of loss. ” W ith the Brandt money-processing equipm ent, Liberty National has cut costs dramatically. According to Ms. Hasting, “Brandt representatives are good at identifying our needs and pro viding us with equipm ent we need and that will improve productivity. Brandt does not try to sell us equipm ent we don’t need; it sells us equipm ent that’s serviceable and will do the jo b .” • • • Ronald J. Fuller has been prom oted to national sales manager of Heller/ Chandler Division, W alter E. H eller & Co., Chicago. Mr. Fuller formerly headed the central regional office of the firm. Commerce Bank (Continued fro m page 26) detailed in harmonious, but slightly darker, colored panels. Windows will be bronze-colored, sem i-reflective glass. Marble flooring in five hues, laid in striking geom etric patterns, will d e c o ra te th e lo b b y /arc ad e areas/ pedestrian bridge. A new parking garage for 650 cars will be located southwest of the new building. It will incorporate groundfloor retail space along Main Street, w ith provision for additional retail space along the future walkway on the eastern edge. G round-breaking took place last February, and completion is sched uled for the spring of 1986. The build ing’s owner is a partnership between Com m erce Bank, Kansas City, and Tower Properties Co. The architec tural firm is the St. Louis-based Hellmuth, Obata & Kassabaum, Inc. • • BBC Names Sgarlata Head O f Mid-Continent Region Bank Building Corp., St. Louis, has named William G. Sgarlata president of its M id -C o n tin e n t reg io n . H e formerly was vice president/general manager, facilities services, at M er cantile Trust, St. Louis. Mr. Sgarlata has overall responsibil ity for marketing the services of Bank Building Corp. in a 16-state area. Bank's Solar System Pays Dividends SGARLATA BankMate to Access Cirrus About January 1, 1985 Citizens State, Shakopee, Minn., saves about $1,200 annually in heating costs with its Suncell Solar System. The system provides 31 % of the building's energy requirements and heats a "greenhouse" installed in the center of the structure. The system uses the sun's energy to provide heat and hot water. It consists of solar collectors, an air-moving unit, automatic controls, thermal storage, distribution ducts and an auxiliary heating system. The collectors absorb heat and distribute it into the bank's working areas. When the thermostat is satisfied, heated air from collectors is sent to a thermal storage area for later use. When energy in the solar system from both the sun and thermal storage is used, the auxiliary heating system is activated. Research Products Corp., Madison, Wis., is manu facturer of the system. 34 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis BankMate, a shared-ATM network available in five m idwestern states, has joined Cirrus, a national shared-ATM system. The 130 ATMs belonging to BankMate will go on-line with Cirrus about the first of the year. BankMate card holders will be able to access their sav ings and checking accounts at any of the 5,300 Cirrus ATMs in 40 states at that time. BankMate is owned by 60 participat ing financial institutions and currently serves Missouri, Kansas and Illinois. The network eventually will include Iowa and Kentucky. MID-CONTINENT BANKER for October, 1984 Illinois Bankers Guests Of Citizens of Decatur At Correspondent Event This y ear m ark ed th e 45th an niversary of the Correspondent Bank ers’ Party hosted by Citizens National, Decatur. The function for 300 bankers was held Septem ber 10 at the Country Club of Decatur. The annual event perpetuates the gathering that originated with the late John H. Crocker, who organized the bank’s correspondent departm ent in 1939. C urrent head of the departm ent is David G. W eber, vice president. Is Your Bank-By-Mail System Strictly Third Class? Make It First Class If "turnabout is fair play," Dale Arnold (I.), Midwest Financial Group, Peoria, got what was coming to him! He received "Biggest Jock" award from David G. Weber, v.p./ corres. dept, head, host bank. In the past, when Mr. Arnold had Mr. Weber's job, he made a similar presentation to Leroy G. Ward, retired s.v.p. and former corres. dept, head at Citizens of Decatur. Accepting prize for longest drive is Tim Jenkins (r), Illinois Nat'l, Springfield. At I. is Rick Cordts, a.v.p. at host bank. In back ground is Jack Dolan (I.), a.v.p./corres. banking officer, and at podium is David G. Weber, v.p./corres. dept, head, both from Citizens of Decatur. Approximately 170 guests played golf during a day-long tournam ent and were joined by other guests at a social hour in the evening. A buffet dinner was served following the social hour. W inner of the top golf prize of low gross was Jim Honegger, State Bank, Saunemin. Low-net winner was Dean Bain, vice president, Old National, Centralia. Receiving the award for the longest drive was Tim Jenkins, consum er ban k in g officer, Illinois N ational, Springfield. — Lawrence W. Colbert, vice president. Is home banking an important part of your overall banking services? It should be. Savvy financial executives have learned that banking by mail costs as much as 50 % less per transaction than an in-bank teller transaction. For maximum efficiency turn to BANK-AWAY, the firstclass bank-by-mail system from Atlantic Envelope Company • BANK-AWAY reduces data entry errors with pre-qualified documentation. • BANK-AWAY eliminates inventories of special-size envelopes and coupons. MID-CONTINENT BANKER for October, 1984 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis • BANK-AWAY’s wallet is designed to make up to 50 round trips between bank and customer. • BANK-AWAY is easy to assimilate into your operations. • BANK-AWAY is “user friendly.” • BANK-AWAY provides extra advertising space for your bank’s products. All this in an efficient, economical and well-designed home banking system! If you’re ready for first-class bank-by-mail, you’re ready for BANK-AWAY. For more information, see your AECO sales representative, or call the plant nearest you. Atlanta, (404)351-5011 Birmingham, (205)956-5505 Charlotte, (704)334-7661 Houston, (713)465-6766 Little Rock, (501)568-1330 Louisville, (502)633-1081 Miami, (305)751-2528 Nashville, (615)244-1071 NewOrleans,(504)241-3361 /4TL4NTIC ENl/ELOPE ©/VIB4NY 35 Reverting From Service Bureau To In-House Data Processing Proves Wise Move by Bank j | ERRY HULL, head of data proces| sing, First National, Warsaw, Ind., as no regrets about the bank’s deci sion to drop its outside com puter ser vice bureau four years ago. First National’s in-house com puter operations are functioning even better since the bank purchased a new IBM System/36 early this year to replace a System/34 installed in 1980, according to Mr. Hull. He says the bank easily was able to convert its old software to run on the System/36. To Mr. Hull, that was further evidence that First National’s decision to drop the outside com puter service bureau was a wise one. “We re 100% happy doing it this way,” he says. “We feel th ere’s noth ing we can’t do ourselves better than the service bureau did. We see no reason to go back.” Through careful planning, purchas ing and reliance on the expertise of its hardware and software suppliers, First National has been able to avoid the terrible problems that often follow a bank’s decision to develop an in-house com puter operation, says Mr. Hull. “We feel we made few mistakes, ” he says. T he bank is saving m oney and paying its own people to do the same work formerly done by the service bureau, he says. He explains that much of what First National’s dataprocessing departm ent does had to do with turning out special reports or lists for use by others in the bank. First National’s former service bureau did not seem to have the flexibility to effi ciently handle requests for special types of reports or lists. IBM supplied a num ber of utilities that perm it the bank to set its own software param eters to produce almost any report that might be needed. The flexibility gives First National control of its “own des tiny,” says Mr. Hull. “Under the old system, if someone in the bank wanted a list sorted in zipcode order, for example, we had to ask for it, wait two weeks and then pay $150,” Mr. Hull adds. “W e can turn 36 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis "Under the old systern, if someone in the bank wanted a list sorted in zipcode order, for example, we had to ask for it, wait two weeks and then pay $150. We can turn out the same report in an afternoon." — Jerry L. H u l l , a . v . p . , data p ro cessin g , First N a t'l, W a r s a w , In d. ig ™ 7 'V' iH i w *' * /ft 11 / out the same report in an afternoon.” Almost all of First National’s dataprocessing needs are handled by the System/36 and software specially de veloped for the banking industry by Frem ont Software, a division of First National, Frem ont, Ind. Checking, savings, trust, safety-deposit box and stockholder accounting and reporting as well as asset/liability-management reporting are among functions cur rently handled on the System/36, says Mr. Hull. The System/36 supports 24 term inals scattered throughout the bank’s four branches and one on-line IBM personal co m p u ter prim arily used by the loan departm ent to do spread sheets. A fter two new F irs t N ational branches are opened by the end of the year, Mr. Hull hopes to proceed with plans to install on-line terminals for all tellers. Already the com puter can pro vide a banking officer with a custom e r’s com plete relationship with the bank. Some of the relationship-banking software Mr. Hull has seen dem on strated provides an incomplete picture of what a custom er’s relationship to the bank is, according to Mr. Hull. “I mean it’s nice to be able to find out what a custom er’s current balance is, but there are times I want to know when we sent the last statem ent to him or how many overdrafts he may have had in the last month or the last year,” he says. After inputting the client’s name and address, First National’s officers are able to see on one screen just about everything they might want to know about a customer, including how pro fitable his overall relationship is for the bank, says Mr. Hull. There may be m ore so p h istic a te d re la tio n s h ip banking programs available, but “our system is a lot easier to use than some I’ve seen,” he adds. Friendliness of the system was a real concern at First National. One of the arguments against developing an in house-com puter capability frequently has been the cost of developing or h ir ing the talented people needed to run th e eq u ip m en t. This was a n o th e r nightmare First National has been able to avoid. “W e’ve never hired one person from outside who has data-processing ex perience,” says Mr. Hull. “Everyone in data processing — and there are six of us now — transferred here from other jobs in the bank. The System/36 is so user friendly that we didn’t have a terrible retraining job. ” Security measures had to be taken early to protect First National’s cen tral-data banks from unauthorized in trusions or entry of erroneous data. First National’s hardware and software have built-in security features that p erm it the data-processing d ep a rt m ent to control access to certain files and to prevent data entry from cer tain te rm in a ls. E v en w h en loandepartm ent representatives use the personal com puter, they generally work with copies of files rather than m anipulate data in the central file, according to Mr. Hull. F irst National prevented a great many headaches by expending a great deal of time and effort researching its needs and availability of products to m eet those needs prior to proceeding w ith plans to d ev e lo p its d ataprocessing departm ent. Bank rep re sentatives started thinking about the project in 1978 and spent more than a (Continued on page 45) MID-CONTINENT BANKER for October, 1984 Now... you can buy your bank supplies from the com pany that m akes your bank bags. From A. Rifkin Co. Having a single source of supply for all of your banking products m akes buying a lot more efficient. Especially when that source is recognized throughout the industry for its high-quality, innovative products and everyday dependability. Now everything from bill straps to security pens. Cash drawers to lead seals. Mobile teller stations to vault trucks. Hundreds of everyday banking supplies are all available from the company with the bank bags that are number one across the country. Rifkin Safety S acs with Super Arcolock-7® for night deposits. Long Zipper coin bags, Courier S a c s and many more New comprehensive catalog and convenient 800 number. Our new 56-page color catalog of supplies is being mailed to your bank. Use it to order whatever you need. Contact your local Rifkin representative or call our toll-free num ber. If you’d like an extra copy of our supplies catalog or one of our bank bag catalogs, write A. Rifkin Co., 1400 Sans Souci Parkway, P.O. Box 878, W ilkes-Barre, PA 18703. Or call 800-458-7300. (In Pennsylvania, 800-358-7300.) https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis v H ow to sell the m oney-wise customer. You start by recognizing the problem. Today’s more experienced customer may know more about the marketplace than your own personnel. And this new breed of customer is not afraid to shop. To match wits with the money-wise customer you need to give your people the knowledge and skills they need to handle each customer contact confidently. Listening to identify underlying needs. Referring when necessary and converting COMPANY business opportunities into sales. You need Business Development Skills (BDS) from MOHR Development. BDS is a sales and customer service program designed N ick Ward, E xec. V.P. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis S ales T raining D ivision MOHR D evelopm en t, Inc. exclusively for retail banking. It teaches the comprehensive skills and knowledge necessary for selling success. BDS is flexible, designed in modular components that let you target areas that best fit your needs, at all levels of customer contact. And it’s proven, with documented increases of up to 30% in cross selling and 50% in closing efficiency. To find out how BDS can help you to sell the money-wise customer return the coupon or contact Nick Ward at (203) 357-1357 to arrange for a preview. B EST TIM E TO CALL 30 Oak Street Stam ford, C t. 06905-5371 MC 10-84 New York Los Angeles San Francisco Tam pa MOHR Development, Inc. Chicago Stamford ITT*?!?) Senate Passes Banking Bill, But It's Halted in House • Depository institutions, including banks, are req u ired to disclose to potential customers all service fees for deposit accounts. • T he S tu d e n t Loan M arketing Association is prohibited from con trolling, directly or indirectly, any bank or thrift. • Banks must disclose their funds availability policies. Mandatory availa bility would be required for Treasury checks deposited by a customer “with an established relationship” with the bank. Interest on deposits in interest earning accounts would be required from date of provisional crediting. • The net-w orth certificates pro gram was extended to those banks with net worth below 3% of capital, that have losses for two successive quarters and that have 20% of assets in agri cultural or housing loans. • State usury ceilings w ere p re em pted on business/agricultural loans, although states have a th re e -y e a r period to reimpose limits. • F ed erally in su red in stitu tio n s with a net worth of less than 3% would be restricted from accepting or main taining brokered deposits. O ther in stitutions would be limited to 200% of their capital and surplus or 15% of total deposits, whichever is less. • P e rm a n e n t ex e m p tio n of ad vances on open-end lines of credit se cured by real estate from Truth-inL ending’s right-of-rescission proce dures. • Simplification of the existing Con sum er Leasing Act and extension of coverage to lease-purchase ag ree ments. • • HE U. S. SENATE passed the stitution with less than 10% of total 1984 Financial Services Com peti assets in commercial loans would be not in the business of mak tive Equity Act (S. 2851) on Septemconsidered ber 13 by an 89-5 vote. The bill would ing such loans. • Provisions establishing and oper perm it banks to offer new securities ating HCs were streamlined. Criteria products and services. The final version of the bill is similar for evaluating Section 4(c)(8) HC activ to the version approved by the Senate ities were liberalized. New criteria are Banking Com mittee last June, when it whether the activities are “closely re agreed that HC subsidiaries should be lated” to banking, “of a financial na able to underwrite and deal in revenue ture” necessary to adjust to techno bonds, m ortgage-backed securities logical innovations to provide banking and commercial paper and in discount and related financial services, and “ substantially identical” to rem ain brokerage activities. The bill also closed the nonbank com petitive w ith banking services loophole and m odernized procedures offered by nonbanking organizations. • The “South Dakota loophole” was controlling HC operations. H o w ev er, in a su rp rise m ove closed by prohibiting state banks from S eptem ber 21, R epresentative F er offering outside their home-state bor nand St Germain (D .,R.I.), chairman, ders services prohibited to national H o u se B anking co m m itte e , an banks or HCs. • State-bank subsidiaries of HCs nounced on the House floor that he no longer will consider major banking leg were prohibited from engaging in any insurance activities prohibited to HCs. islation this year. • Regional agreements were sanc As a result, the banking industry probably will not obtain securities- tioned for five years. • A national usury ceiling was im writing powers, and the “nonbankposed on adjustable-rate mortgages bank loophole” will not be closed. Thus, when Congress adjourns Octo (ARMs) of less than $500,000 by limit ber 5, Comptroller of the Currency ing the interest-rate increase over the C. T. Conover is likely to lift his mora lifetime of the mortgage to a level five torium on more than 300 requests for percentage points above the initial rate, effective for all loans made after nonbank approvals. Representative St Germain said his June 1, 1985. Discounted ARM rates committee will be considering these were included. issues in the next session of Congress (January, 1985). H e did issue this Continental Restructuring Plan Okayed warning, “Any industry group that rushes forth and goes through the ex TOCKHOLDERS of Chicago’s Continental Illinois Corp. late last pense of creating a nonbank now is m onth approved th e financial-assistance/restructuring plan forewarned that the operation will be announced in July by Continental, the FD IC and other bank regulators, dissolved by statute.” with 71% of outstanding shares being voted in favor of the plan. Of the Specifically, the Senate bill author shares voted at the meeting, 98% were voted in favor of it and 2% izes the following: against. • Authorization for HC subsidiaries After close of business Septem ber 26 (date of the meeting) on comple to engage in new securities activities of tion of certain closing formalities, Continental Illinois Holding Corp. underwriting and dealing in revenue will own the 40.3 million outstanding shares of Continental Illinois bonds, m ortgage-backed securities Corp. common stock, and owners of Continental Illinois Corp. common and commercial paper and discount stock will own an equivalent num ber of shares in the HC, subject to the brokerage activities. Senate action FD IC ’s option. These stockholders also will receive rights to buy newly clarified that any bank-securities affili issued HC common stock on a one-for-one basis over the next two years. ate can carry a bank’s name unless The FDIC will own preference shares convertible into 80% of the there is an objection by the Fed. corporation’s common stock. • The nonbank loophole was closed. In commenting on the third quarter, William S. Ogden, chairman of The term “bank is redefined to be any Continental Bank, says that after the $l-billion injection of new capital institution insured by the FD IC or by the FDIC, the corporation’s equity-to-total-assets ratio will be about that accepts transaction accounts and 6.5%. In addition, after the sale of about $3 billion of loans to the FDIC, makes commercial loans. “Com m er total loans will be about $26 billion — about 17% less than year-end cial loans” are defined to exclude con 1983, according to Mr. Ogden. sumer-type loans and investments in commercial paper and CDs. An in T S MID-CONTINENT BANKER for October, 1984 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 39 Provisions That Affect Banks In the Tax-Reform Act of 1984 By J. Alan Harkness and James W. Koeger, Peat, Marwick, Mitchell & Co., St. Louis L AST July 18, the Deficit-Reduction quires — for short-term obligations ac Act of 1984 was signed into law by quired after July 18 — that the daily President Ronald Reagan. In additionportion of the acquisition discount be to a variety of spending provisions, the included ratably in income for both act contains a package of income-tax accrual and cash-basis banks. Alterna provisions entitled the Tax-Reform Act tively, the taxpayer can elect to com of 1984 (the act). This article is the first pute the daily portion of the acquisi of a two-part series that highlights the tion discount using the “constantprim ary income-tax provisions that interest-rate m ethod” by computing will affect banks. It is not intended to the discount accruing on such day on be a complete technical discussion of the basis of yield to maturity. the topics covered. This provision of the act will elimi The three main areas of the act that n ate th e ta x -p la n n in g te c h n iq u e may affect banks deal with securities whereby banks could purchase Treas and loans, tax-preference items and re ury bills or other similar short-term porting requirem ents. O ther provi obligations with m aturity dates in the sions of the act affect all taxpayers. succeeding year and defer recognition Some of the general provisions that of taxable income. will affect many banks will be dis Taxpayers may elect to apply the cussed in the second article. new rule to all obligations held during 1984. If they so elect, they may recog Securities and Loans nize any increase in taxable income D iscount Incom e on Short-Term due to the change over a five-year Obligations. Under prior law, interest period. This affords a significant tax on short-term obligations with original planning opportunity to banks that maturities of less than 12 months, such hold significant amounts of Treasury as Treasury bills, was not taxable until bills or o th er sh o rt-term discount paid on sale or maturity. The act re obligations. Mr. Harkness is the partner in charge of the St. Louis tax department and has primary responsibility for that office's finan cial-institution tax practice and serves as regional bank-tax coordi nator for Peat Marwick's south central region and as associate liaison tax partner for the firm's bank practice. He belongs to the Missouri Society of Certified Public Account ants and has served as chairman of its taxation committee. He has been a teacher for the Illinois Bankers Association and the St. Louis AIB Chapter. Mr. Harkness also has written articles for various publications, including M id-C ontinent Banker , and is a frequent speaker at bank-industry meetings. He holds certified-publicaccountant certificates in Missouri and Illinois. Mr. Koeger is a senior manager in Peat Marwick's St. Louis tax department, working extensively in the banking industry and serv ing many bank clients of the St. Louis office. He is a member of the American Institute of Certified Public Accountants and the Missouri Society of Certified Public Account ants. Mr. Koeger has taught for the AIB and has written several articles for M id-C ontinent Banker . https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Ordinary Income fo r M arket Dis count. The act requires gains on dis positions of certain obligations to be re-characterized as interest income in stead of capital gains to the extent of accrued market discount. The provision covers only taxable obligations issued after July 18, with original m aturities in excess of one year. Since banks are required to treat gains on dispositions of most securities as ordinary income, this provision will not affect banks significantly, but may affect tax treatm ent of securities held by bank HCs. Deferral o f Interest Expense. The act requires banks to defer a portion of their otherwise deductible interest ex pense on borrowings deem ed to be in cu rred to acquire m arket discount obligations after July 18. A taxpayer s “ n e t d ire c t in te re s t e x p e n s e ” is allowed as a deduction only to the ex te n t that the expense exceeds the amount of market discount allocated to the days during the year the bond was held. The term “net direct interest ex pense” is defined as the excess of in terest paid or accrued by the taxpayer over interest includible in gross in come for the taxable year. The net effect of this provision is a matching of expense and income with a deferral of the deductibility of a portion of the cost of carrying a market-discount obliga tion until the bond matures or is disr posed of. Unless a bank otherwise establishes an appropriate allocation, interest paid or accrued will be com puted by taking total in terest expense for tbe year times the ratio of the basis of market discount bonds acquired after July 18 to the basis of all assets. Presumably, if the “net direct interest expense” is zero or less than zero, there will be no deferral of interest expense. To the extent interest is deferred under this rule, it is allowed as a de duction for the taxable year in which the taxpayer disposes of the marketdiscount bond. Taxpayers can elect to d e d u c t d e fe rre d -in te re s t ex pense MID-CONTINENT BANKER for October, 1984 prior to disposition where, subsequent to the year of deferral, there is net in te re st incom e from th e m arketdiscount bond. Under this election, any deferred-interest expense is treat ed as paid or accrued to the extent interest from the bond included in tax able income exceeds interest expense deemed paid for that year. This can be made on a bond-by-bond basis. Market-Discount-Income Election. The act provides that taxpayers can elect to include accrued market dis count in gross income. If this election is made, neither the rule requiring ordinary income treatm ent on disposi tion nor th e in tere st-d eferral rule would apply to bonds acquired during the period the election is in effect. Once made, this election cannot be revoked without consent of the 1RS. E xpansion o f Original-Issue-Discount (OID) Rules. The act dram at ically expands the scope of the OID provisions that require both borrowers and lenders (cash as well as accrualbasis taxpayers) to recognize originalissue discount as interest annually over the life of the obligation. U nder prior law, obligations issued by natural p er sons (nearly all home mortgages and consumer loans) and obligations not held as capital assets (arguably, all loans held by banks) were excluded from OID provisions. The act repeals th e c a p ita l-a sse t re q u ire m e n t for obligations issued after 1984 and ex ceptions for obligations issued by natu ral persons for obligations issued after March 1, 1984. OID rules generally will apply if the stated redem ption price of the debt in stru m en t is g reater than (1) the stated principal am ount, or (2) the principal amount determ ined by dis counting, at a rate equal to 110% of the applicable federal rate, all payments due under the instrum ent. While the total impact of these pro visions is still unclear, particularly with respect to discounted consumer loans and recent 1RS pronouncem ents regarding the Rule of 78s, it is likely that both banks and borrowers will find their recognition of interest on many loans revised u n d e r th e new law. Apparently, consumer-type loans with total payments of $250,000 or less are exempt from the level-yield original issue discount rules and presumably could continue to be accounted for on the Rule of 78s and similar methods. At a minimum, fully amortizing consum er loans with a term of five years or less that the 1RS has allowed to remain on the Rule of 78s should be unaffected, provided total payments will not ex ceed $250,000. (Continued on page 42) Funds-Allocation Method Advocated As A/L-M anagem ent Technique A said he found it “very frightening” that N a sse t/lia b ility (A /L )-m atrix technique through which sources regulators are telling thrifts to calcu late annual profit-and-loss effects as a of funds are allocated to uses of funds based on rate sensitivity is the most ratio of gap m ultiplied by interest-rate change divided by 12 (num ber of practical m ethod available to banks and S&Ls to manage the controllable months in a year). He asked bankers in his audience to try using the formula segments of their balance sheets to maximize interest-rate spread. This is and got a variety of responses. “You’ve got to have a gap schedule the opinion of George K. Darling, because it’s the only place you can de Darling & Associates, New York City. term ine opportunities for re-pricings,” Mr. Darling advocated the fundsallocation technique during a series of M r. D arlin g said. H o w ev er, gap schedules are only one input in an seminars at which he appeared in late summer. The two-day seminars were effective A/L-management program. Nor is it possible — as some brokers sponsored by Peat, Marwick, Mitchell & Co. and bore the title, “A/L Mansuggest — to “hedge a gap,” according to Mr. Darling. “If you ever have a broker tell you to hedge a gap, fire him, because it’s a sign he doesn’t understand gap man "It's when the public per agem ent,” he said. “You can hedge an ceives that an institution has an asset or a liability, but you can’t hedge earnings problem that trouble a gap.” Duration analysis is a useful tech starts/7 nique for protecting the value of a bond portfolio or for pension funds as a means of guaranteeing annuities, but it is impractical as a tool for A/L manage agement: Profitability and Risk in a m ent, Mr. D arling said. D uration Time of Change. ” At the St. Louis ses evolved as a m ethod of managing book sion, Mr. Darling appeared on the pro value of equity, not to manage netgram with John Lastavica, vice presi interest margins, he said. dent, First National, Boston; Andrew “The reason we talk about it is be Hall, first vice p resid en t, D rexel, cause (American Banker columnist) B urnham , L a m b e rt, B oston; and Sanford Rose writes about it.” he said. Mr. Darling explained that at most James M. Nickerson, senior managerof the seminars h e’s spoken at, some St. Louis office, Peat Marwick. The St. Louis seminar was held Septem ber 12- one in the audience usually brings up duration analysis, and he likes to try to 13 at the Marriott Pavilion Hotel. P rio r to in tro d u cin g th e funds- clear up the confusion surrounding the allocation technique, Mr. Darling de topic. He said duration techniques scribed the limitations of static gap- have th e w rong A /L -m anagem ent m anagem ent reports and duration- focus, and duration calculations are analysis techniques for effective A/L based on com plicated assum ptions management. He said there are some th at could cause ju d g m en t errors. advantages of static-gap reports in that M o reo v er, d u ra tio n -m a n a g e m e n t they provide a measure of potential approaches can — in the short term at earnings exposure based on antici least — negatively impact earnings per pated changes in interest rates and share, and he asked mem bers of his provide caution signs for investment/ audience w hether the public views funding decisions in specific maturity earnings or equity as the best measure ranges. Static-gap reports also are of an institution’s safety and sound helpful in suggesting some limited op ness. Answering his own question, he tions for action, he said, but are useless for “what-if” projections and ignore said, “It’s when the public perceives the velocity at which assets and liabili that an institution has an earnings problem that trouble starts.” ties reprice. Mr. Darling described the “fundsGap reports, contrary to what the Federal Home Loan Bank Board has allocation” technique he advocated as been telling S&L leaders, cannot be being much like “filling teacups” to used to project profit-and-loss effects, make sure all assets are fully funded. Mr. Darling emphasized. In fact, he Earlier in the program, Mr. Darling MID-CONTINENT BANKER for October, 1984 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 41 had defined asset/liability m anage m ent as a “planning and control proc ess for matching as well as intentional ly mismatching the mix and m aturities of assets and liabilities in ways that provide a favorable and even flow of net-interest income, while assuming reasonable business risk. The key con cept is the coordinated and sim ul taneous m anagem ent of both assets and liabilities.” He said the fund-allocation m ethod of A/L management has nothing to do with a bank’s profit-and-loss-center accounting, but through use of a ma trix, enables a user to identify specific areas of the balance sheet where — d ep en d in g on th e in stitu tio n ’s in terest-rate forecast — interest margins co u ld e ith e r ex p and or narrow . According to Mr. Darling, the A/L Liability Matrix — a tradem ark of Mr. Darling’s company — allows an in stitution to: • Prioritize the sequence in which liabilities are allocated to fund assets. • Analyze current and projected in terest margins for each asset and liabil ity. • Allocate operating costs to each deposit and investm ent category to de term ine “n et” profitability of each A/L match. • Form ulate alternative strategies to m inim ize contraction of interest margins in any forecast economic sce nario. Mr. Lastavica preceded Mr. D ar ling’s presentation with a brief history of the evolution of A/L m anagement from the 1950s to the present. Mr. Hall provided the audience with an overview of hedging with interest-rate futures. — John L. Cleveland, assis tant to the publisher. Tax-Reform Act (Continued fro m page 41 ) Tax-Preference Items Under prior law, the tax benefit of certain tax-preference items was sub ject to a 15% reduction. The act raises the percentage reduction from 15 to 20 beginning in 1985 on tax-preference items including bad-debt deductions, interest expense on deposits used to carry tax-exempt securities and gains on sale of depreciable real property. Bad-Debt Deduction. The act re quires the bad-debt deduction for years after 1984 be reduced by 20% of the excess of (1) the otherwise allow able deduction for a reasonable addi tion to the reserve for loan losses over (2) the deduction that would have been allowable had the bank maintained its reserve for all years on the basis of actual experience. Because of the re cent drop in the allowable percent of eligible loans used in the percentage method, most banks are unable to de duct a bad-debt deduction that ex ceeds the addition based on actual ex perience. Therefore, this 20% reduc tion generally will not be a significant item. Interest Expense on Deposits Used to Carry Tax-Exempt Securities. The act requires the deduction for interest expense on deposits, investm ent cer tificates or withdrawals or repurchasable shares incurred to purchase or continue to carry tax-exempt securities be reduced by 20% in years after 1984. This provision will apply to all taxexem pt securities purchased after 1982, even though securities p u r chased in 1983 and 1984 were subject to a 15% rate during those years. R ed u ctio n of in te re s t ex p en se should be considered in the compari son of taxable versus tax-exempt in vestments, especially since Congress may increase this reduction rate and apply it retroactively to all tax-exempt securities purchased after 1982. This provision was first enacted in the Tax Equity and Fiscal Responsibil ity Act of 1982 at a 15% rate and now, only two years later, it has been in creased to a 20% disallowance rate. It would be unreasonable to assume that MicroHRIS__________ The Human Resource Information System for Microcomputers ...........................with r tlliP ™ JL l Now MicroHRIS speaks your la n g u a g e. . . . plain English. Ask for p erson n el reports in sim ple co n v e rsa tio n a l English. Just type . . . . . . . . "LIST ALL THE MANAGERS WITH THEIR DEPARTMENT AND SALARY” . .. a n d see your rep ort o n the screen. No p ro g ra m s to write, no c o m p le x c o m m a n d s to learn. B e ca u se now MicroHRIS in co rp o ra te s R :base Clout™ the re m a rk a b le n a tu ra l la n g u a g e tra n sla to r irom M icrorim, Inc. We have CLOUT™___so you will too! Call or write tor tree information. Demonstration disk available. Personnel Consulting S ervices, Inc. An A ffiliate of Marine Bank Erie, Pennsylvania PCSI Headquarters: 901 State Street Suite 318 Erie, Pennsylvania 16501 (814)452-3497 Southwest Office: Suite 500 5501 L.B.J. Freeway Dallas, Texas 75240 (214)233-4121 R b a se Clout'“ is a tradem ark of Microrim, Inc, 42 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis MID-CONTINENT BANKER for October, 1984 tion reports relating to receipts of mortgage interest from individuals b e ginning in 1985. The report to be filed on or before January 31 of the following year (first report due January 31, 1986) should be filed with the IRS with a copy furnished to the person paying the mortgage interest. It should con tain the name and address of the p er son from whom the interest was re ceived, amount of such interest re ceived for the calendar year and such other information as the IRS may re quire. For mortgage loans entered into af ter Decem ber 31, 1984, it is antici pated that recipients of mortgage in Reporting Requirements The act continues the trend of enact terest will require the payor to furnish ing reporting requirem ents to enforce his taxpayer-identification num ber as compliance with tax laws. The three part of the mortgage-loan approval or new compliance provisions affecting closing process. W ith respect to m ort banks are for mortgage interest, fore gage loans in existence on D ecem ber closures and IRA contributions. The 31, 1984, it is anticipated that the IRS act also contains reporting require will require recipients to request, at ments for certain cash transactions in least annually, the payor’s taxpayervolving $10,000 or more; however, it identification num ber for those not provides an exception for cash re already obtained. For the purpose of this reporting ceived by financial institutions as de fined u nder the Bank Secrecy Act. requirem ent, the term “m ortgage Therefore, it appears th ere are no means any obligation secured by real additional reporting requirem ents for estate. Interest received by one p er son — for example, a service company banks for cash transactions. Mortgage Interest. Banks and other — on behalf of another shall be re taxpayers are required to file informa ported only by the first person receiv- there will be no increase in this in terest-disallowance percentage in fu ture years. With each increase in this interest-disallowance percentage, the effective yield and m arketability of m unicipal obligations obviously is diminished. Gain on Sale o f Depreciable Real Property. The amount that could be treated as capital gain on the sale of depreciable real property in years after 1984 will be reduced by 20% according to the act. This additional ordinary in come should be considered in com put ing after-tax proceeds from the sale of depreciable real property. IRA PROCESSING FOR MICROS • Accounting and Analysis in one com plete package • All account and instrument informa tion is available “on-line”... transactions are posted as they occur • Compliance with all government re porting requirements including forms 1099R, W-2P, and 5498 • Multiple instruments can be estab lished for one account • Analysis provides personalized, detailed projections of future retirement bene fits — meets disclosure requirements • “What-if ’ Modeling For further information, write or call.... CFG, Inc. 700 East Ogden Avenue W estm ont, Illinois 6 0 5 5 9 ( 312) 986-1006 1-800-248-0400 FASHION STAR C LA S S IC C A R E E R A P P A R E L We are the leading professional career apparel manufacturer in the nation, and interested in helping you create the best possible image for your institution. We offer the highest quality tailoring and a wide variety of styles, colors and fabrics. In addition to our ladies’ career wear we offer men’s suits, sport coats and Arrow shirts. We manufacture our own garments and sell direct to you, eliminating middle man mark-up. On time delivery and a courteous, efficient Customer Service Department give our clients service that is unmatched in our industry. For further information on improving your image through career apparel, please fill out and return the form below to: FASHION STAR, INC. 67 Liberty Church Rd., Carrollton, GA 30117 I— | w r - o we would like your representative to call for an appointment I__ | Y u O to show us your sample line of Career Apparel. □ Please send additional information. We employ approx. (No._______ women) (No.-------- men) We □ do □ do not use career apparel. Company Name __________________________ — ----------------------— Address------------------------------------ —---------------------- -— City/State/Zip _______________________ __________________ ________________ Phone ------------------------------------------------------------------Signed_________________________ Title--------------- Date------------Call Toll Free 1-800-241-1120 for Further Information. In Georgia Call 1-800-822-4595 MID-CONTINENT BANKER for October, 1984 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 43 ing the interest. (IR A s). The act provides th at the Foreclosures. The act also institutes annual report of the trustee of an IRA reporting requirem ents for situations to the IRS and the individual owner involving foreclosures or abandon must attribute contributions to a spe ments of property-securing loans. Be cific tax year of the individual. This ginning in 1985, a lender who fore applies to contributions made after closes or otherw ise acquires an in 1984. terest in any property that is security * * * for indebtedness, or has reason to know that such property has been The next article will cover several abandoned, must file a return with the other of the act’s provisions that will IRS w ith a copy furnished to the affect most banks, including new rules debtor by January 31 of the following on company automobiles, other prop year. erty used partly in a trade or business The return filed with the IRS must and part personal use, interest-free or contain the name and address of the below -m arket loans, debt-financed borrow er, a general description of corporate stock, industrial develop such property and such indebtedness. m ent bonds and fringe benefits. • • In the case of foreclosures, the return also should include the amount of in debtedness at the time of such acquisi Bank CEO s tion and the amount of indebtedness (Continued fro m page 28) satisfied in such acquisition. These new reporting requirem ents are intended to assist the IRS in d eter sons, but that is a possibility for the mining if there is any discharge of in future. H e ’s been m ore concerned debtedness income or gain on disposi about program m ing the system to tion to the debtor. They do not apply to sound an alarm if dem ands on the any loan to an individual secured by build in g ’s boilers exceed expected tangible personal property that is not peak levels. held for investm ent and that is not As good as the Security First Nation used in a trade or business. al system is, its capabilities are limited In d iv id u a l R etirem e n t A ccounts compared to an even more powerful Put The Proven Power O f Telem arketing To W ork Telemarketing has become the golden m edium o f marketing— the proven profit maker o f the 80’s. To put it to work for your bank or savings institution, call on the experienced specialists at Financial Telemarketing Systems. We deliver pre-tested, results-proven programs that generate dra matic increases in response for: ■ H om e E q u ity Loan P rogram s H R etail Credit E xp an sion P rogram s ■ IR A A ccount A cq u isition s H C .D . R o llo v er and R eten tion P rogram s ■ New C ustom er D evelop m en t For a comprehensive brochure and a custom proposal at no cost, call or write: TOLL FREE Joe Pasquini, General Manager Financial Telemarketing Systems 22 East 49th Street New York, N.Y. 10017 I fA f i i n f± f 1 800 233-3320 212-308-979' https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis FINANCIAL ADMSKDNOF Financial Marketing Corporation *ofAmerica,inc automated-control system recently in stalled at the 18-year-old, 276,000sq u are-fo o t C h a rle sto n (W. Va.) National Bank building. Tom Martin, building manager, says he has yet to fully explore the capabilities of the sys tem, but he has big plans for the fu ture. So far, only the heating and airconditioning equipm ent has been put on line, and the bank has hired an energy manager, Jim Hurlow, to use the system to monitor and optimize energy use. A 16% gain in energy effi ciency thus far is attributed to the new equipm ent, according to Mr. Martin. We have better control over ener gy costs, and we can predict demand and peak loads well in advance,” says Mr. Martin. Lighting and fire alarms probably will be controlled by the new system one day, he adds. Theoretically, a building-control system as powerful as the one installed at Charleston Nation al sim ultaneously could m onitor as many as 2,000 on-site or off-site sens ing devices. Sensing devices might be burglar detectors, fire/smoke detec tors, card-access slots, closed-circuit television cameras or simple panels used to monitor floor tem peratures. If th e ban k ’s h e a tin g /v en tilatin g /a irconditioning equipm ent was properly configured, the system could do all of the following without human interven tion: • Sense location of a fire and sound an alarm. • Automatically call the fire depart ment. • P ressu rize floors im m ed iately above and below the fire to contain smoke. • Turn on fans on the floor where the fire is located so that smoke is vented outside. • Recall all elevators so they are not used while the fire is in progress. Mr. Martin says Charleston Nation al’s management was attracted particu larly to the fire-detection and alarm features of the system. Such a system not only is the best protection available against the possibility of a devastating fire; it helps offset rising propertyinsurance premiums, he says. Security First National’s Mr. Von R autenkranz says he believes the financial-services in d u stry will be tu rn in g increasingly to auto m ated building-control systems due to com petitive pressures caused by deregula tion. Banks have less leeway to in crease prices these days, he says, and building-operation costs traditionally have been among the most difficult costs to pass along to consumers. MID-CONTINENT BANKER for October, 1984 To stay competitive, he says, banks are going to have to take “counterm ea sures to protect themselves from the rate increases the utilities are asking for.” M oreover, given the uncertainty banking d ereg u latio n has created, bank CEOs probably are going to be receptive to any new equipm ent that promises to watch over the bank while they get a good night’s sleep. — John L, Cleveland, assistant to the pub lisher. Reverting (Continued fro m page 36) year meeting with com puter hardware and software suppliers. “W e must have m et with Frem ont (the software supplier selected) a half dozen times and called them another 15 or so tim es,” he says. He adds that it is wise to make the hardware and software purchase deci sion sim u lta n e o u sly ra th e r th an buying a com puter and then trying to locate compatible software. It’s far b et ter to know when purchasing the hard ware that software exists for it that will m eet the bank’s current and future needs, he maintains. C om patibility was not a concern when First National installed its System/36 this year. IBM supplied soft w are-m igration aids that perm itted First National to re-compile all its soft ware to run on the System/36. “It was only about a six-hour jo b ,” he says. First National currently has about a fiv e -h o u r-p e r-d a y w indow d u rin g which it could accept data-processing work from outside custom ers. Mr. H ull says the bank is resisting the tem ptation to turn a few extra dollars of profit on its data-processing depart ment. “W hen you start doing outside data p ro c essin g , y o u r re sp o n sib ilitie s change,” he maintains. “You suddenly are responsible to all those customers out there. Let’s say the system goes down for eight hours. Whose work are you going to do when you get back up and running again? I think this is one reason a lot of banks have gotten out of outside data processing. ” Having worked so hard to get con trol of its own destiny with respect to data processing, First National isn’t about to relinquish that control, he says. — John L. Cleveland, assistant to the publisher. Award Jewelry: Because It's N ot Merely the Thought A That Counts. A pat on the ra bonus check is not enough. These days, you need something of lasting value to show appreciation to your employees. Award jewelry items are gifts worth the keeping and the wearing. Send the attached coupon for more information on how we can provide a lasting incentive program for those superior achievers in your ■ ■ li '■ I l i ■ m b MHMI . . *, ■ ■ . • Charles T. Mallet has been named senior vice president, inform ationm anagement services, H eller Interna tional Corp., Chicago. He formerly was w ith G eneral E lec tric C red it Corp. • Walter E. Heller & Co.’s Central Commercial Finance Division, based in Chicago, has prom oted Sampath Ayyanger, Patrick M. Mulcahy, Ange la J. Narel, Harry R. Novak, Eugene J. O ’Hara and James A. Richards to vice presidents. T e r n jS tr r ij 2033 Oak Industrial Dr. N.E. Grand Rapids, MI 49505 1-800-253-0882 Toll Free □ I’d like to know more about award programs. □ Our company logo or my business card is attached. Please send sample artwork and a no-obligation quote on an: □ Award Ring Program □ Emblem Jewelry Program □ Please call—I have some questions. Name Title Firm Address City/State/Zip Telephone Number wrnmmrniÈmÊÊmÊmmmgmmKÊmmÈSgsmMmmËÊmmÈM MID-CONTINENT BANKER for October, 1984 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 45 C areer-A pparel Program Proves Boost for Bank in Virginia I N the late ’70s, the statewide Bank m eet its style, color and budget needs. of Virginia decided to undertake a Then came the hard part — selling total marketing plan to improve a per the program to the bank’s staff. Senior formance described as “lackluster and management agreed not to pressure below p a r.” “C hange” becam e the employees. It was realized from the watchword, and adoption of a careerstart that the staff had to feel positive apparel program was one of the ele about the program and that peer influ ments of the marketing plan. ence was more im portant than topF irst, the R ichm ond-based bank down pressure. A staff-only focusstudied career-apparel programs at group concept was adopted. Thirty other banks and found six common ele public-contact employees, both men ments that would help such a program and women, were selected at random be successful: 1. Include both men and from across the state to take part. They women on a mandatory basis. 2. Pro were shown the garments via a fashion vide at least one day a month when show, with several employees from the employees don’t have to wear their group selected to model the clothes. career apparel. 3. Im plem ent a 30-, Fashion Star R epresentatives w ere Ail objectives for the career-apparel program at Bank of Virginia were met and surpassed, according to a bank spokesperson. Employee morale has never been higher; quality of customer service is at an all-time high; market share is increasing, and profitability has increased signifi cantly. 60-, 90-day probationary period before career apparel is issued to reduce co sts/h an d lin g p ro b lem s. 4. On issuance of career apparel, have em ployees sign reim bursem ent agree ments authorizing withholding from final pay if the apparel isn’t returned when they leave the bank. 5. Charge branch managers or assistant managers with responsibility for making sure the correct apparel is worn and to secure the apparel when employees term i nate. 6. Specify that employees should not mix their own clothes with their career apparel, except for shoes. Next, the bank obtained articles on career apparel from the Bank M arket ing Association Information Center. According to a bank-staff m em ber, Mary Charlotte Shriner, the most use ful article was “Observe Basic Steps to A ssure Successful C areer-A p p arel Program ,” from the October, 1980, issue of M i d - C o n t i n e n t B a n k e r , written by Jim Fabian, senior editor. The next step was to determ ine which vendors would be contacted. The field was narrowed to one firm, Fashion Star, Inc., Carrollton, Ga. With that company’s representative, the bank selected the best package to 46 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis present to explain fabrics and styles and to answer questions. They also m oderated the fashion show. After ward, the em ployees w ere left to themselves — no bank management or Fashion Star representatives — and had an opportunity to express their candid opinions. They were extremely positive about the career-apparel con cept and the fashions recom m ended for the employees. After many hours of planning and developing the program, it was de cided that all tellers, customer-service rep resen tativ es, branch secretaries and other branch-support-platform people who routinely work with the public would be eligible to wear career apparel. Providing the clothes was done in two phases: Tellers would comprise Phase I and begin wearing apparel in Septem ber, 1981, which also was the launch date for the bank’s new m arketing program. All others were considered Phase II and were to begin wearing the apparel in March, 1982. To ensure a coordinated and suc cessful program, the bank appointed a full-time career-apparel coordinator, w hose duties include en su rin g an orderly distribution of the initial order from the supplier to branches, establishing/maintaining records of all items issued each employee, maintaining a clothes inventory and acting as liaison between the bank and apparel sup plier. On Septem ber 5, 1981, the new look at Bank of Virginia was introduced in a full-color supplem ent in more than 1,000 new spapers th ro u g h o u t th e state. Finally, to make all employees really feel part of the new Bank of Vir ginia, the bank gave a special em ployee kit to all staff members. The kits contained copies of all ads, bum per stickers, desk cards and a special item — paper cutout dolls in career apparel. In addition, women employees were given career-apparel scarves and men career-apparel ties. In the fall of 1982, a survey of all employees who wear career apparel was conducted. Key findings were: Eighty percent wanted to continue wearing the apparel; 45% said they at least felt a little more professional when wearing the apparel; 85% b e lieved the apparel helps set their bank apart from other banks; 71% said the apparel created a good image for the bank; 72% said customers sometimes comment on the apparel, with 30% saying customers like the concept and 19% saying customers think it looks professional. According to Ms. Shriner, all objec tives for the career-apparel program w ere m et and surpassed; employee morale has never been higher; quality of customer service is at an all-time high; market share is increasing, and profitability has increased significant ly. • • Negotiations Completed For Harris Acquisition By Canadian Bank Harris Bancorp Inc., Chicago, has become a wholly owned subsidiary of Bank of Montreal. Year-long negotia tions were com pleted at the Harris Bank building in Chicago Septem ber 4 at ceremonies that saw the Canadian bank paying (in U. S. dollars) $546,734,016 for 6,667,488 shares of Harris Bancorp. The Harris organization, which con tinues to operate under its own name, has assets of $7.8 billion. No significant changes are planned in Harris manage m ent structure or personnel. Plans are to have the board composed largely of outside directors and that Harris Bank be managed as a self-sufficient orga nization. MID-CONTINENT BANKER for October, 1984 We make house calls. The gnomes of Freddie Mac are not only well-versed but also well-traveled. ■ Indeed, we are always eager to meet with our customers. And each of our regional offices is tailored to suit local needs. ■ Whether you want to sell your mortgages for cash or swap them for PCs, w e’re ready to structure the deal that’s right for you. Just say when— our bags are packed. 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Box 37248 ■ Washington, D.C. 20013-7248 © 1984, FHLMC https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis THE GNOMES KNOW sm Freddie Mac Federal Home Loan _______ Mortgage Corporation Installment Loan Processing Fed's Paym ent-System -Risk Sem inars Encourage Bankers to Com m ent FOR MICROS • Complete loan document preparation system using formats created by the user • Calculates add-on, simple interest, dis count interest and simple split rate installment loans as well as single payment notes and balloon loans • Determinesandprintsacompleteamortization schedule • Helps assure A.P.R. and Regulation Z compliance • Calculates Rule of 78’srebates of inter est, insurance premiums and other charges • Provides future value and present value calculations For further information, write or calf.... CFG, Inc. 700 East Ogden Avenue Westmont, Illinois 60559 (312)986-1006 1-800-248-0400 For faster service on BANK CREDIT INSURANCE CALL THESE SPECIALISTS Harold E. Ball • Carl W. Buttenschon John E. King • Milton G. Scarbrough 1-800-527-5511 INDUSTRIAL * p LIFEINSURANCECOMPANY P.0. Box 660274, Dallas, Texas 75266-0274 I • u . U U A UUL Irite[PLP23Q Q /TQ Q A member company of Republic Financial Services. Inc ^M b b h h i 48 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis N AN ATTEMPT to enable bankers to com m ent know ledgeably on proposals by the Fed to manage the risks connected with daylight over drafts, the Fed and the ABA sponsored a series of sem inars over the past month. Seminar format included a presenta tion by a representative of the Fed, followed by comments by commercial bankers. At the St. Louis seminar, Edward C. Ettin, deputy director of the F ed’s di vision of research/statistics, presented the Fed’s proposal to reduce risk on large-dollar transfer-system transac tions. He stressed that the Fed had yet to decide which steps to take and urged bankers to send their ideas on th e topic to F ed h e a d q u a rte rs in Washington. Deadline for comments is October 29. D aylight cre d it exposure is the problem, Mr. E ttin said. Such expo sure by one bank can affect the risk and exposure of o th er banks. This can occur on funds-transfer networks and is called systemic risk. He used the example of participa tion on a shared-ATM network to illus trate how systemic risk can occur. “If Bank A s custom ers withdraw more cash from the other participants’ ATMs than the other participants’ cus tomers withdraw cash from Bank A s ATMs, Bank A will need to send funds to other participants to settle the net debit created. In effect, the other par ticipants have given cash to a customer prior to receiving good funds from Bank A. Bank A has a daylight over draft with other participants. If Bank A is unable to make this settlem en t transfer, the other participants may in cur a loss. In this way, Bank A s day light exposure can affect the credit risk of other participants in a systemic fashion.’’ Among the F ed’s proposed solutions to systemic risk are the following: • Bilateral net credit limits, w here by receivers of funds evaluate the credit-worthiness of the sending bank. With this evaluation, Mr. E ttin said, the receiving bank places an internally specified limit on the value of the net credit it is willing to receive from a sender. In effect, this places a limit on the net debit a sending bank can incur with each receiving bank separately and thereby limits the receiving bank’s credit exposure to different sending banks. • Bilateral net credit limits, which already are used on most private funds transfer systems. • A sender net debit “cap,” often expressed as a ratio to a sending bank’s capital position. The cap seeks to limit the total net debit of a sending bank. It’s a more direct limit on the credit exposure of a sending bank. • Payments finality, which has been defined to exist when a receiving bank provides customers with access to any funds received prior to settlem ent and, in addition, gives up its right of recourse to the customer in the event the bank sending the funds fails prior to end-of-day settlem ent. In effect, Mr. E ttin explained, the receiving bank is providing a guarantee to treat funds received as collected balances prior to settlem ent based on a credit judgm ent of the sending bank. If the sending bank is unable to settle, the receiving bank guarantees the funds received (and used) by the customer. Payments received aren’t provisional, but are final. Bankers taking part at the St. Louis m eeting included Eugene A. Leonard, sen io r vice p re sid e n t, M ercan tile Trust, St. Louis, and Everett C. Gambrell, executive vice president, Texas Commerce Bank, Houston, both rep resenting the large correspondentbank viewpoint; and Norman J. Tice, chairm an, C harterB ank, St. Louis, representing the com m unity-banker viewpoint. Mr. Leonard stressed that credit risk is the primary problem and creditrisk management is the solution. “You can’t take the credit risk out of banking,’’ he said, “but you can keep the risk at a manageable level.” More use of term fed funds would help the situation, he said, but there must be some incentive on the part of the Fed to get bankers to take this route. He added that a portion of Mercan tile’s fed-funds transactions are col lateralized and that most upstream correspondent banks take care to p er form credit analyses of respondents. H e reco m m en d ed th at th e F ed make its final rulings voluntary for par ticipating banks because the private sector is in a position to handle the risks. A question period concluded each seminar. — Jim Fabian, senior editor. MID-CONTINENT BANKER for October, 1984 Banking Scene (Continued fro m page 54) ence in Tennessee prior to the failure of their banks. W hether knowledge of the Butcher family’s political clout may have perm itted their banks to get by with practices that otherwise would not have been accepted is, of course, speculation. In my opinion, however, political p re ssu re often influences bank regulators and, worse, often en courages bankers to pursue ill-advised policies on the fatal assumption that their political acumen and clout will extricate them from any tight spots they might blunder into. Bankers sometimes justify their in volvement in politics as being of help to the community, and there can be no doubt that bankers need to be involved in the cultural and social affairs of their communities. W here a banker’s in volvem ent is totally self-serving or overly ambitious in term s of his/her or the bank’s commitment of resources, however, there is no long-term gain for the community or the bank. O ne well-known banker makes a point of reminding bank officers and directors that the money their institu tions handle is “tainted.” The money, he says, “ tain t the bank’s or the bank e r’s, but tis the depositors. ” Bank officers and directors should always keep that anecdote in mind when con sidering their fiduciary responsibili ties. They have a responsibility to see th a t th e ir d e p o s ito rs ’ m oney is prudently invested. 2. Bank executives must keep their boards well informed about policies and problems. Boards should insist on being sent copies of the bank examina tion report and any significant com m unication from regulatory officials within a reasonable time after the com munication is received. Included in the list of communications that must be distributed to directors is the Uni form Bank Performance Report and the Peer Group Report. Attached to the reports should be a form asking each director to signify by signature that he/she has read the report, under stood it and — in conjunction with others on the board — plans to take steps to correct any problems. The vast majority of banks do not take precau tions like this, but they are necessary. I recall one bank executive who was accused of removing all adverse criti cism of himself and his policies from the Report of Examination prior to dis tributing it to the board. A good way to prevent such practices is for the board to establish written policies on how the documents they want to see should be presented and how they should be re viewed. In some cases, there is noth ing wrong with summary reports, but the board must ensure that it gets the information it needs to judge the p er formance of the bank and its officers. 3. Boards need to establish a policy to determine when a CEO might be fired. As I have written in a previous column, firing a bank CEO is one of the toughest jobs any board has, but the job is easier if the board has written policies stating the level of perform ance expected and when term ination of a C E O will resu lt. A C A M EL (C apital A dequacy, Asset Quality, Management, Earnings and Liquidity) rating by regulators of three or more could be taken as a sign that the board should replace the CEO. Of course, such a rating may be due to factors beyond the C EO ’s control, and board policy can be written to cov er such exigencies. But a board that has established a policy of removing the top officer or officers when p er form ance does not m eet specified levels will be in the driver’s seat, not vice versa. F u rth e rm o re , all con cerned will be aware that corrective action must be taken well in advance of the time such action actually becomes necessary. As soon as perform ance starts to fall into the danger zone, the CEO will either shape up or ship out and the board will begin to come together on necessary remedial mea sures. 4. Board policy must cover the sensitive issue of loans to directors. Directors often are appointed to bank boards because they or their firms are good customers. No director should be appointed to the board unless he/she brings something more to the perform ance of the bank than just business, but it is a fact of life in banking that direc tors often are among the bank’s most First Interstate, Los Angeles, Promotes 3, Appoints 3 F irst I n te r s ta te B ancorp, Los Angeles, has prom oted James Hook to senior vice president, corporate fi nance group; Lisa L. C orbett to audit manager and Doug Wallis to vice president/corporate development. A ppointed to officer status w ere Sandor E. Samuels to counsel in the office of general counsel; Larry D. McCurley to vice president/loan re view in auditing and Bonnie S. Down ey to vice president/tax departm ent. MID-CONTINENT BANKER for October, 1984 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis highly prized loan customers. In all cases, however, it is im pera tive that the board ensure that no laws are violated in the approval of such loans and that steps are taken to re move directors whose loans are judged substandard or nonperforming. Policy should cover how such substandard loans are to be recovered. For years I have advocated some de gree of positive direct verification of significant collateral for bank-credit customers and this procedure is espe cially important on collateralized loans made to insiders. This need not be an expense for the bank, since the loan agreem ent can state that the bill for appraisal of the collateral be paid by the applicant. Since appraisals by out side auditors can be falsified, the appraisal contract should include a caveat that legal rem edies will be sought against appraisers in the event their audit fails to m eet professional standards. Almost any banker can claim that his bank’s written loan policies are p ru dent, but when those policies are in adequately enforced, they are worse than no policy at all because they cre ate the illusion of prudence. In all too many banks, internal auditors — who . . . a m o st gracious hotel in do w n to w n Minneapolis • 20 0 Lu xu rio u s guest room s, su ites & m ini-suites. • M eeting & Ban quet fa c ilitie s to 30 0. • Coffee Shop, D ining Room & Piano B a r Lounge. • Heated Indoor Pool & Sauna. • Lim o u sin e se rvice a vailab le to and from A irp o rt. • S h u ttle to downtown o ffices, shopping, theaters and M etrodom e. • Free p arking . • SPECIAL COM M ERCIAL RATES AVAILABLE C A L L FO R D E TA ILS Regency Plaza Hotel 41 North 10th Street Minneapolis, Minnestoa 5 5 4 0 3 612-339-9311 49 have responsibility for pointing out violations of written policy — report to operating m anagement rather than to an audit committee of the board. At most banks, this chain of com mand is a m atter of expediency. The board is not present every day to deal with loan-policy violations. Yet the board and its audit committee have a responsibility to see that established policies have been im plem ented and violations are being uncovered and corrected. External auditors can be engaged to ensure policy compliance if necessary. ARE YOU SO BUSY DOING YOUR JOB THAT YOU’RE FORGETTING YOUR CA REER? Call us today for a no-obligation dis cussion of your career ambitions. Be low is a PARTIAL listing of fee paid career opportunities: Call or submit re sume with salary history stated. Branch Administrator ... $35-40K Commercial Loan Admin. $40-45K Controller ...................... $35-45K Sr. Commercial Lender .. $35-45K Trust Officer................... $30-40K $37-45K VP Loan Review Super. Internal Auditor.............. $24-36K Trust New Business....... $30-35K Personal Trust Admin. .. $32-35K Branch Manager ............ $25-35K Commercial Loan Officer $28-32K Financial Service Officer $23-30K Secondary Mktg. 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BANK POSITIONS P R ES ID E N T — $25MM Ag bank PRESIDEN T — $30MM community bank COMML LOAN — $70MM community bank P R ES ID E N T — $35MM Ag bank AG/COMML LOAN — $30MM community bk. COMML LOAN — $150MM suburban bk. AGRI-LOAN — $20MM Ag bank 5. Banks and society as a whole M oreover, banks may n eed to do m ore must recognize the growing responsi to con vin ce the public that directors bilities of bank directors. Banks need are the first line of defense against fail c o n c e rn e d , c o m p e te n t and h a r d ure. working directors. This is one reason a Perhaps then, banks will get m ore bank directorship carries a certain de and more boards that are not overly gree of status and protection from dominated by strong CEOs — d irec liability. No one who fits the qualifica tors who carry out their duties as cu sto tions cited above is likely to serve on a dians of bank safety and soundness. • • board if there are no rewards other than becoming a sitting duck for a law • Index to Advertisers • suit. Society needs to recognize the re sponsibilities of bank directors. In Agri Careers Inc.................................................................. 50 large m easure, they are watchdogs American Bankers Assn................................................. 17 Express Co. (Travelers Cheques) . . . 51 over not only the health of their in American Amsouth Bank, N.A......................................................... S/2 stitutions, but the financial health of Arlington Resort Hotel .................................................. S/10 Business Services, Inc......................................... S/16 their community economy. Their deci Arrow Atlantic Envelope Co........................................................ 35 sions influence the local economy in Bank Board Letter ......................................................... 33 Bank Building Corp........................................................... 55 countless subtle ways every day. 19 Bank Earnings International ..................................... A major perception of bank direc Barclays American/Business Credit ....................... 52 .................... 56 Boatmen’s National Bank, St. L o u is tors, according to Harvard professor Brittenum & Associates, Inc........................................ S/3 Miles L. Mace, is that they are over CVK Personnel & Management T ra in in g ............ 45 Bank, St. L o u is ............................................. S/5 paid for what they actually do and Centerre Cheshire Inn & Lodge .................................................. 31 underpaid for what they are supposed Commerce Bank, Kansas City ................................. 15 Computer Fundamentals Group, Inc. . . 26, 4 3 , 48 to do. Continental Bank, Chicago ........................................ 53 It is interesting to note that bank Farmers & Merchants Bank, Eufala, Okla........... S/12 Fashion Star, Inc............................................................... 43 directors typically are paid a lower Federal Home Loan Mortgage Corp......................... 47 stipend than directors of industrial and Financial Telemarketing System ........................... 44 Equitable Securities, Inc.......................................S/14 manufacturing firms, yet their respon First First Lease & Equipment Consulting Corp. . . . 29 sibilities are — if anything — greater. 13 First National Bank, Louisville ................................ First Oklahoma Bancorp....................................................S / l l Perhaps banks need to re-examine the Fremont Software ............................................................ 25 fee structure for directors in light of HBE Bank Facilities Corp..............................................10-11 Hagan & Associates, Tom .......................................... 50 the greater work load on them today. Industrial Life Insurance Co........................................ 48 Just send resume, including most recent salary, or a note telling how we can contact you. Innovision, Inc........................................................................S/15 Kuhlmann Design Group ............................................. 20 Liberty Nat'l Bank & Tr. Co., Oklahoma C it y .............................................................. 2 MBI subsidiary of Bank Building Corp.................. 7 MPA Systems ................................................................... S/8 Management Search, Inc.............................................. 50 Mercantile Bancorp, St. Louis ................................ S/13 Midland Bank & Trust Co., Memphis .................. S/9 Mohr Development, Inc.................................................. 38 National Bank Builders & Equipment, Inc. . . . S /l North Central Life Insurance Co................................ 2-3 Personnel Consulting Services, Inc......................... 42 Regency Plaza Best Western Hotel ...................... 49 Rifkin Co., A......................................................................... 37 Rothschild, L. F., Unterberg, Towbin .................. 5 Son Corp................................................................................. S/4 Spangler Candy Co............................................................ 52 Terryberry Co........................................................................ 45 Texas American Bancshares, Inc.............................. 50 23 Union National Bank, Little Rock ......................... United Missouri Bank, Kansas C i t y ....................... S/7 United States B a n k e r.................................................... 27 Whitney National Bank, New Orleans .................. 3 Ag Banking Personnel (Nationwide) Let us help you. Call the ag lending personnel specialists without cost or obligation. Confidential. Employers pay us to hire the best. Jim Atkinson Human Resources Texas American Bancshares, Inc. P.O. Box 2050 Fort Worth, Texas 76113 (817) 338-8167 Principals Only An Equal Opportunity Employer M/F/H Linda 515/394-5827 New Hampton, IA 50659 Jean 515/263-9598 if no answer, 712/779-3567 Massena, Iowa 50853 30/7 CAREERS, INC. “* AG BANKING SPECIALISTS MID-CONTINENT BANKER for October, 1984 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis State News (Continued fro m page 6) John L. Falatok has been elected corporate banking officer, C entran Bank, Akron. He formerly was a com mercial banking officer/credit analyst, BancOhio National, Akron. Great D IM -D IM Give-away (It’s Money in Your Bank!) Dum Dums are the famed, flavorful lollipops loved by kids of all ages. Great as inexpensive giveaways to build goodwill-say “thanks” to your custom ers. E a sily tied in with all types of promotional themes. The 30 retail size is yours in assorted flavors for about a penny and a half a pop in 25 lb. cartons - Item 551. Also avail able: 120 count box, Item 66. Each pop wrapped in colorful wax paper. Most candy wholesalers have Dum D um s. C h e c k Yellow P a g e s under “C a n d y & Conf ecti oner yWholesale” and order today. Huntington National, Columbus, has prom oted Linda R. Kay from trust administrator/assistant vice president to trust administrator/vice president. Elected assistant vice presidents were Gene A. Cahall and William J. Janoch, private banking sales representatives, Ralph F. Griffith, financial institution representative, Diana L. Hansford, banking office manager, and Glenn W. McClelland, commercial loan repre sentative. WISCONSIN Jon H. Stowe has been elected vice p resid e n t/e x ecu tiv e-in -c h arg e of a new group within the Marine Corp., Milwaukee, known as the financial in stitutions group. Mr. Stowe is a senior vice president at Marine Bank, Mil waukee, and has joined the manage m ent committee of Marine Corp. Pur pose of the new group is to provide banking/financial services to financial institutions. Valley Bank of Black Creek has elected Duane Wussow to its board. He is o w n e r/o p e ra to r, W ussow D airy Farms. Alan M. Holman has been prom oted to assistant vice president, First In ter state Bank of Wisconsin, Sheboygan. Form erly a business banking officer, Mr. Holman is in the business banking d ep artm en t of the downtown She boygan office. Ruth A. Rynish has been named presi d en t, F irsta r Bank F reed o m . She joined the bank in 1971 and formerly was cashier. In her new post, Ms. Ryn ish succeeds Stanley M. Sielaff, who resigned Septem ber 1. Valley Bank, Shawano, has nam ed John A. Hennessy executive vice president/director. He joined the bank’s parent HC, Valley Bancorp, 20 years ago and has been president, Valley N orthern Bank, Appleton, and a direc tor, Valley Bank, Black Creek. Wil liam R. Sands has been elected presi dent, Valley N orthern Bank, Appleton, moving up from vice president/ cashier. B u s in e s s C red it A n affilia te of FREE SAMPLE BAG Just fill In coupon, attach to letterhead and mail. NAME ______________________________ T I T L E ______________________________ BANK_______________________________ ADDRESS___________________________ CITY _______________________________ STATE___________________ZIP________ P^SPANGLElfCANOH CO. Bankers expect us to provide financing from a different perspective. We put lendable resources to work quickly by establishing the value o f a customer’s assets (tangible and intangible) and structuring a flexible loan package. We’ll lend alone or in participation with you. Remember our name. P.0. Box 71/Bryan,Ohio 43506 Dial 1-800-BARCLAY. PHONE ____________________________ 52 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis MID-CONTINENT BANKER for October, 1984 Conquering the alien world of international trade. It could happen to you. One day a valued business customer comes in for help with an import or export transaction. And suddenly you’re thrust into another world. A world popu lated by strange beings with mystify ing names like Standbys, Aggregate Limits, Tenors and Two-Party Recourses. What to do? If you turn your customer away, he may take all his j s s elsewhere. Fortunately there’s an easy ative. A phone call to Conal Bank. Continental is a major factor in international trade. In fact, we’re one of the few banks who are members of the International Chamber of Commerce headquartered in Paris. We can provide every financial service your customs could need. From issuing participating in International ¡tiers of Credit to Bankers ceptances to Currency HedgDocumentary Collections. We do all the work. You ce your relationship with ustomer. And you collect a wormwhile fee to boot. If that sounds good, why not make that phone call now, before that customer comes in. Call Robert C. Vasko at (312) 828-4046. Tell him you’re looking for new worlds to conquer. ’ s’ > -r <- ^ ^ *r CONTINENTAL BANK C o n tin e n ta l Illinois N a tio n a l B a n k a n d T ru st C o m p a n y of C h icag o , 231 S o u th L aS alle S tre e t, C h icag o , Illinois 60697 A tla n ta • B o sto n • C h ic a g o • C lev elan d *D a lla s • D e n v e r H o u sto n • L os A n g e le s • M in n e a p o lis • N e w York O k la h o m a C ity • St. L o u is • S an F ra n c is c o • S eattle • W h ite P la in s MID-CONTINENT BANKER for October, 1984 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 53 THE BANKING SCENE By Dr. LEWIS E. DAVIDS Professor of Finance Southern Illinois University, Carbondale Lessons From Failure of Butcher Banks NEPT or too aggressive manage m ent and lackadaisical reporting and controls have been suggested as "Laws and regulations are being at the root of the need for a not always effective in curing federal bail-out at Continental Illinois National, Chicago, and the more re or preventing bank problems c e n t shak in ess of th e $32-billion F in an cial C orp. of A m erica, Los where a bank — and its board Angeles. — are dominated by a strong In hindsight, it’s always easy to point personality set on a course of an accusatory finger at management and criticize what should or shouldn’t management. . . ." have been done. The only true justi fication for these exercises in laying blame is that they somehow prevent other managers at other financial in stitutions from following the same son of the p a s t,” th e re p o rt says, paths that led to the earlier trouble. “namely, that laws, regulations and su There is a need to discover the guilty pervision are not always effective in and carry out punishm ent, of course, curing or preventing problems where but society benefits from the example a bank — and its board of directors — set by those punished, not from the are dominated by a strong personality mental or physical anguish suffered by who is set on a course of management. ” the accused. The report goes on to say that U nit The problems at Continental and ed American Bank, Knoxville, “en American Savings are still being sorted gaged in a virtually unbroken pattern out, and it probably will be some time of unsafe, unsound and conceivably before we learn w hat really w ent unlawful banking practices over a sixwrong. There is an earlier bank failure year period.” — actually, a series of failures — that The report also criticizes what it pretty well has been sorted out by calls “a pattern of regulatory failure” now. At least, we can begin to make a surrounding the Butcher bank prob clearer assessment of what led to the lem. The FD IC and the Office of the failure. C o m p tro ller of th e C u rre n cy had The collective failure of nine Ten num erous m eetings and exchanged nessee banks with total assets of nearly correspondence with bank officers and $1.7 billion last year ranked at that directors, the re p o rt says. All the time as the largest commercial bank warnings and jawboning by regulatory failure in U. S. history. The banks — officials ultimately failed to produce all controlled by the Butcher family — the desired results. were an integral part of Tennessee’s Officers and directors of the once economy and their failure was a major Butcher-controlled bank in Nashville blow to the state and the region. probably now wish th e y ’d h eed ed Reporting on the cause of the de those warnings since they are being mise of the Butcher financial empire held personally liable for millions of and the earlier failure of Penn Square dollars in bad loans. A letter from the Bank in Oklahoma, the Governm ent FD IC exerpted recently in a Nashville Operations Com mittee of the House of newspaper stated that “Directors or Representatives said that the failures officers of the bank, in contravention of did not have many new lessons to offer. their duty . . . may have caused, au “Rather (the failures), confirm a les- thorized or perm itted the bank to en I 54 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis gage in unsafe, unsound or irregular practices and may have failed to exer cise due diligence in discovering or correcting unsafe, unsound or irregu lar practices.” O th e r p arts of th e F D IC com munication accused officers and direc tors of: • F ailu re to supervise loan dis bursem ents properly. • Extensions of credit in violation of the bank’s own written loan policy. • Extensions of credit in violation of the bank’s legal lending limit. • Failure of directors to exercise adequate supervision over employees and officers. • F ailure to heed warnings from bank supervisory authorities. • Extensions of credit to borrowers known to be in financial difficulty. • Failure to scrutinize insider trans actions. • Failure to adhere to applicable laws and regulations. • Perm itting conflicts of interest to the detrim ent of the bank. Some directors and officers at other failed Butcher banks received similar FD IC notifications and some of the directors say they do not feel they have any legal liability for the loans. They denied knowledge of any wrongdoing. Obviously, this case is going to drag on in the courts for some time, and the FD IC allegations are not proof of any one’s guilt. Enough has been revealed about the problem s of the Butcher banks, however, to make some general conclusions about what m ight have gone wrong and how similar incidents can be prevented. Some of my conclu sions or recommendations may not be welcomed by some top banking execu tives, but the soundness of the banking system, in my view, demands such remedies. 1. Political clout should not hinder oversight by regulators. The Butchers w ielded trem endous political influ(Continued on page 49) MID-CONTINENT BANKER for October, 1984 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis fU tili 111 S 1 Hi ì JH i 1 T he R ight Idea When we decided to remodel and expand our building” says Rowan C. McAllister, President of First National Bank of Barron, Wise wanted it to be distinctive... no another pretty bank.’ We have always been closely tied to our community and wanted our facility to express our own unique personality to our customers and the community we serve. It had to be warm, friendly, inviting, convenient ...a n d different. We talked to a lot of firms, but the people at Bank Building really listened. And understood. They studied us, our needs, our people and our community. And they came up with the right ideas. Our new facility is exactly what we wanted...efficient, productive, unique...and successful. We couldn t ask for more.” Let us put our ideas to work for you. Call Tom Spalding, Meeting the needs of the community you serve . . . by design. l 9 l Bank Building Corporation 1130 Hampton Avenue St. Louis, MO 63139 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Boatmen’s Ted Operations Assistance Overline Assistance. Loan Participations. Investments. Boatmen’s Vice President Ted Smothers working with Bob Menz, Chairman and President of The First National Bank of Highland. Whatever your correspondent needs, Boatmen’s has knowl edgeable people to assist you. Call Ted Smothers. He can help. Correspondent Banking Division THE BOATMEN'S NATIONAL BANK OF ST. LOUIS 314 - 425-3600 Member FDIC
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