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December 30,1985

Des Moines, Iowa

Vol. 14 No. 37
RM A President Looks at Coming Year—

Urges ‘Back to Basics’ for 1986
Robert Morris Associates
Brown Brothers Harriman & Co.
New York City
1985: A Year o f Reassessment
and Confidence Building
Several times this past year, the
hanking system’s image of being
fair, safe and
sound was called
in to qu estion .
Neither the pub­
lic nor Congress
has fo r g o tte n
the huge 1984
federal rescue of
Continental Illi­
nois. The widelypublicized co l­
lapse of private
insurance systems for state-char­
tered thrifts in Ohio and Maryland
created significant public relations
problems for banks, particularly the
state insured depository institu­
tions. The banking industry and fed­
eral and state regulators acted
quickly to allay public concern; how­
ever, such events could not help but

erode public confidence in the bank­
ing system.
The Congressional Banking Com­
mittee chairmen continued to call
for increased scrutiny of and finan­
cial disclosure by financial institu­
tions. House Banking Committee
Chairman Fernand St Germain re­
iterated often his financial service
priorities of increased supervision,
regulation and disclosure, and an
end toward unchecked growth and
expansion. Senator Jake Garn pro­
mised not to back any banking bill
in 1985 unless it was a comprehen­
sive piece of reform legislation.
Nevertheless, the Supreme Court
ruling in mid-1985, sanctioning
regional banking compacts and the
lack of a national banking consensus
on a national “ trigger date” for na­
tionwide banking, destroyed any
hope for passage of a 1985 banking
Given the higher number of bank
and thrift failures and the ongoing
publicity regarding the dwindling
resources of the FDIC and FSLIC
insurance funds, 1985 regulatory ef­
forts were directed toward assuring
the safety and soundness of the fed­
eral and state deposit insurance
funds and toward targeting poor
quality assets before major portfolio

problems surfaced. The Comptroller
of the Currency’s office put into ef­
fect in 1984 a policy o f more special­
ized and more frequent examina­
tions geared to areas o f systemwide
risk to banking or public policy con­
cerns. Domestic loan quality assets
began to overshadow Latin Ameri­
can debt problems as Third World
debt negotiations proceeded, albeit
at a slow and modest pace.
In response to increased capital
guidelines, the bank managers con­
tinued to adjust their balance sheets
through the issuance of various qua­
lifying securities. In 1984, the top 50
bank holding companies increased
their primary capital funds by
20.3%. More than 40% of this
growth was attributable to the is­
suance of mandatory capital notes
— subordinated notes that mandate
conversion into common stock.
Due to a general downward move
in interest rates, a more positive out­
look toward third world debt reser­
vicing, and prospective regional
banking consolidations, the atmos­
phere for bank financing continued
to improve in 1985, particularly in
the equity and equity-related mar­
kets. Approximately $517 million in
convertible debt and $453 million in
straight equity was issued by 26 of
the largest bank holding companies
in the first six months of 1985, com­
pared with $217 million in conver­
tible debt and $500 million in

to make MNB work for you.
Toll free: 1-800-332-5991

hants National Bank m
Federal Reserve Bank of St. Louis


Norwest Bank Des Moines, N.A.


C a ll (515) 245-3131 o r to ll-fre e (800) 362-2514
Member FDIC

one of the reasons
we’re first in Iowa.
Lowell Barkley

straight equity for all of 1984.
In addition to issuing debt, banks
continued throughout 1985 to bol­
ster their loan loss reserves. A num­
ber of large bank holding companies
increased their loan loss provisions
in the first half o f 1985 more than
100%. Banks will continue to add to
reserves as loan quality — particu­
larly in agriculture, energy, LDCs,
and construction — deteriorates. De­
spite the heavy additions to loan
loss reserves, bank earnings in 1985
were generally good due to robust
trading profits and the selling of
bank assets.
The past year has thus been a
time of reassessment toward bank
balance sheets, adequacy of capital,
loan loss reserves, limits and restric­
tions on loans, and disclosure. All of
the aforementioned steps taken
toward improving the quality of
bank earnings and loan portfolios
will remain with us in 1986.

lines and policies.
The increasingly complex com­
mercial financing techniques will
also require additional skills on the
part of commercial lenders. The five
Cs of credit will still predominate,
but the makeup of cash flows, in­
come statements, and balance
sheets will be different. Lenders will
have to become more knowledgeable
of the industries they lend to,
especially the newer, faster-growing
service industries.
Increased geographic expansion
will continue to take place; already
27 states have passed some form of
reciprocal interstate hanking com­
pacts. The absence o f a banking bill
in 1985 to close the nonbank bank
loophole merely accelerates the
trend toward geographic and pro­
duct expansion, subject in some in­
stances to Federal Reserve defini­
tions of a bank and acceptable bank
holding company activities.
1986: Safety, Soundness, Quality
From an economic perspective,
— A Back to Basics Approach
real economic growth continued in
In light of the continuing number 1985, albeit at a slower pace, extend­
of bank failures and mergers and ac­ ing the current recovery to its fourth
quisitions, broader assurances of consecutive year. Progress on infla­
safety and soundness with respect tion, unemployment, and producti­
to loans and deposits will remain im­ vity has surpassed nearly all econo­
portant requisites to maintaining mic forecasts. Inflation at the pro­
public confidence and growth in the ducer price level rests comfortably
years ahead. The regulators will re­ at a year-over-year rate o f .2% (end
quire safety assurances in the form of September 1985) and consumer
of increased capital/risk guidelines, prices, which bottomed out in July
increased disclosure, and limits on 1982 at 2.4%, still measure only
the sale of loans. Only bank manage­ 3.2% for the 12 months ended Sep­
ment can implement these guide­ tember 1985. Additionally, the rapid

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increases in the money supply
through most of 1985 would seem to
ensure that the economy will re­
bound to a 3.0-3.5% annual rate of
growth in the latter half o f 1985 and
that a recession will be averted in
Monetary policy cannot afford to
be too loose in the months ahead,
lest the higher inflation argument
prevail. Clearly, the Group of Five
Nations, which met in New York in
September 1985 and agreed to bring
the dollar back to more reasonable
levels vis-a-vis other world curren­
cies, particularly the yen and the
Deutsche mark, placed some pres­
sure upon the Federal Reserve not to
tighten monetary policy in the
United States.
The U.S. economy appears to be
responding, as expected, to the Fed­
eral Reserve’s 1985 monetary stimu­
lus. Total employment and sales
picked up significantly in the latter
half of 1985. Few economists are
predicting a recession in 1986 and
one can only guess what will happen
beyond 1986.
For commercial lenders, 1986 will
provide another year of opportunity
for carefully managed growth, and
additional time to adjust to chang­
ing regulatory guidelines and policy
initiative aimed at preserving the
safety, soundness, and quality of
banking in the United States.
■ THE AUTHOR— Mr. Williams has been
with Brown Brothers Harriman & Co. since
1957. He has held various credit and lend­
ing positions with the bank, including se­
nior credit officer from 1972 to 1980. In
1981, Mr. W illiams was named Brown Broth­
ers’ treasurer, with responsibility for tax
policy and strategic planning. He is in­
volved also in various phases of asset/liability management and serves as the bank’s
legal and government liaison. He has been
an active member of Brown Brothers’ credit
committee for more than 15 years and was
elected president of Robert Morris Associ­
ates last fall.

14-State Ag Meeting
Looks at Ag Legislation
Banking leaders and association
executives from 14 mid western
states met December 15 in Kansas
City with A B A and IB A A leaders to
look again at possible legislation
aimed at doing something about the
deteriorating midwest ag situation.
There were 53 in attendance at the
meeting co-chaired by A B A Presi­
dent-Elect Mark Olson, president,
Security State Bank, Fergus Falls,
Minn., and Alan Tubbs, immediate
past chairman A B A A g Committee

Call on the “Experienced Professionals”
Ready to meet your
H First N ational Lincoln



correspondent needs.
and president, First Central State
Bank, DeWitt.
No consensus was reached at the
time, but A B A said it would work
through a special Task Force to
work out specifics of any legislative
proposals that were developed.
Topics discussed included possi­
ble authorization for taking loan
losses over an extended period of
time to alleviate immediate capital
pressure, warehousing of loans to
hold land off the market in a
“ holding tank,” creation of a secon­
dary market, or perhaps a bond
market to securitize loans. It is an­
ticipated the group will meet again.

A FirsTier Bank

Company of Waterloo. Both of the
banks are currently owned by Peo­
ples Bankshares, Ltd.

Nebraska News

As noted in last week’s Newslet­
ter, three Nebraska banks owned by
R ob ert W ekesser were closed
December 19 by the Nebraska bank­
ing department. A t press time, word
had not yet been received if bids had
been received by the FDIC for pur­
chase of the banks. Subsequently, it
was reported that two o f the banks
were sold and one was to be li­
Farmers State Bank of Sargent,
Iowa News
with deposits of $11.6 million, was
ALB I A: A t Peoples National taken over by the First National
Bank and Trust Company, James E. Bank of Ord and was reopened as a
Oberts has been appointed presi­ branch to be called Farmers Bank of
dent. He has over 20 years banking Sargent. The Bank of Panama, with
experience in all loan and operations assets of $4.7 million, was acquired
areas and has served as president of by Farmers State Bank of Douglas
the First National Bank of Law- and now is operated as Farmers
renceville, 111. and the Weldon Spr­ State Bank—Panama branch. No
ings Bank in St. Charles, Mo. James bids were received for Farmers and
E. King, formerly president and Merchants Bank of Comstock and
chairman o f the board, will continue the FDIC proceeded with the payout
as chairman. Some minor opera­ of the bank’s $3.7 million deposits.
tional changes are expected, but
* * *
there will be no major personnel
changes at the bank in the
The Nebraska Bankers Associa­
foreseeable future, according to Mr.
tion is sponsoring its 1986 Lending
Conference on Jan. 22-23 at the
DUBUQUE: The First National Kearney Holiday Inn. The con­
Bank of Dubuque has announced ference is entitled “ Main Street
that a plan of ownership restructure Nebraska: A Lending Challenge.”
as authorized by its stockholders on Registration begins at 8:30 a.m. on
Oct. 30, 1985, was completed on Jan. 22 with continental breakfast.
Dec. 16, 1985. First Dubuque Corp. Programs run from 9:00 to noon
is now the parent company of First with lunch from noon to 1:00 p.m.
National Bank and the former Adjournment is at 4:00, and there
stockholders o f First National Bank will be a reception from 4:30 to 5:30.
are now the stockholders of First The schedule is the same on Jan. 23
Dubuque Corp. The same manage­ except that adjournment is at 5:00.
ment will serve First Dubuque Corp. Preregistration is $120, with regis­
that serves First National Bank. No tration at the door $140; this fee in­
change in management will result cludes materials, breakfasts and lun­
from the completion o f this transac­ ches. To register, contact the N BA
office in Lincoln.
W ATERLOO: Effective Dec. 23,
1985, the LaPorte City State Bank
will be merged with and become an
office of Peoples Bank and Trust
Federal Reserve Bank of St. Louis

Member. F D I C .

13th & M Streets, Lincoln, NE 68501

ted vice presidents. Kent Bergemann was named vice president,
capital lending, special loan divi­
sion. He is a commercial banking
representative and had been assis­
tant vice president. Ronald Randall
and Gregory Weir were named vice
presidents o f the Norwest Corporate
Finance division o f Norwest Capital
Markets, Inc. Both men previously
se rv e d as c o r p o r a te fin a n ce
representatives. Virginia Terry
recently joined the bank as manager
of stock transfer administration.
Prior to that, she was senior vice
president of stock transfer services
at First Trust Company of St. Paul.
M INNEAPOLIS: Jon D. Sorenson
has joined First Bank System, Inc.
as vice president and assistant con­
troller. He most recently served as
vice president and treasurer of First
Federal Savings and Loan in Eau
Claire, Wis.
M INNEAPOLIS: The American In­
stitute of Banking will hold four
seminars in January. All will be con­
ducted at the A IB Education Center
in Minneapolis. Dates and topics
follow: Jan. 16—A IB Customer
Relations with a Motivational Focus
Sem inar; Jan. 2 1 —The L egal
Aspects of Supervision; Jan. 23—
A IB Professionalism for Office Staff
Seminar; Jan. 29—A IB Interper­
sonal Skills Seminar.

Wisconsin News

Financial Services Corporation, Gor­
don C. Mueller and Lawrence K.
Elton have been promoted to execu­
tive vice presidents. They will head
newly created divisions in the corpo­
ration. Mr. Elton’s divisions will in­
clude the holding company’s bank­
ing and non-banking subsidiaries.
Mr. Mueller’s division will be shared
corporate services. Mr. Elton will re­
main in his current position as ex­
ecutive vice president and COO of
F&M Bank in Menomonee Falls.
Mr. Mueller formerly served as vice
Minnesota News
president and chief financial officer
M INNEAPOLIS: A t Norwest Bank o f F&M Financial Services, a mem­
Minneapolis, four have been appoin­ ber o f the corporations board of di-

rectors and senior vice president of
F&M Bank, Menomonee Falls.

South Dakota News
The South D akota Bankers
Association is sponsoring its annual
legislative dinner on Jan. 30 at
Kings Inn Convention Center in
Pierre. The reception is at 6:00 p.m.
and the dinner at 7:00. The dinner
honors the South Dakota Legis­
lature and Constitutional officers.
To register, contact the SDB A office
in Pierre by Jan. 25.

aqri careers, inc.


Small Northwest Iowa bank needs SENIOR OFFI­
CER to be in charge. Daily management of bank.
Must have 5 years bank experience with main em­
phasis on Ag loans and management. This is a
very clean bank with good growth potential in a
successful and growth oriented small bank chain.
Salary to $38,000.

Season's Greetings
Our Banking Friends
Malcolm Freeland
Cy Kirk

NO. TWO PERSON needed In $30M AG bank (ma­
jor holding company). Responsibilities include
operations and lending. 7 years bank experience
preferred. Close to metro area in Iowa.


Fees Paid by Employer
No contacts made without prior consent & approval.

1010 Equitable Building
Des Moines, Iowa 50309


Ag Banking Specialists:

Linda Helt 515-394-5827 Jean Eden 515-2638598 W/F
New Hampton, IA 50659
712-7798567 (M/T/TH)
Massena, IA 50853

Rates are $5.00 per line per
in se rtio n . A dd $3.00 fo r file
letters per in se rtio n . Id e n tity o f
file le tte r advertisers cannot be

Purchase of
Sale of Rare Coins
Reliable and respected service
for over 20 years

1535 Linden St., Suite 201
Des Moines, Iowa 50309
Phone 515/244-8163

CASH MANAGER • Need several years of cash
management from a $500M + bank. Greater
Omaha. To $45K.
CEO - S.E. Nebraska bank of over $20M. Need 10
years or more experience. $40-50K.
COMMERCIAL LENDERS - Need 2 + years in com­
mercial lending. Omaha. To $30K.
All fees are paid by our client employers.
Richard L. Beem, CPC
11246 Davenport Street
Omaha, NE 68154
Phone: 402/330-3260

Member National Personnel Associates
We're Nationwide

AG PRESIDENT - Recognized ag professional with several
years of successful leadership. Experience includes
reorganizing portfolio, bank structure and cleanup opera­
tions. Now CEO of a $30mm bank with 20 years banking
experience including large bank commercial lending.
AG LENDER • Solid knowledge gained through working
with financial statements, analyzing cash flows and
ratios. Grew up on farm, degreed and spent the last four
years running an ag department for a rural bank. Seeks op­
portunity and advancement.
and over 13 years of commercial lending experience within
a large bank. Exceptionally proficient in new business
development. Has been running departments in major
metropolitan areas over the last four years and is looking
for a senior position that will lead to the executive level.

Estate Appraisals

l sed by bankers
throughout the midwest

AUDIT SENIOR - A $3 billion midwestern bank group seeks
an individual with 2-4 years experience to meet audit re­
quirements of six eastern Iowa and western Illinois banks.
A close working relationship with bank CEO’s requires an
applicant with strong written and oral communication
skills. A CPA is preferred but not required. This is a high
visibility position which offers an excellent opportunity for
advancement with a dynamic organization. Salary will be
commensurate with experience. Send resume in con­
fidence to file WEB, c/o Northwestern Banker.
$55MM Northeast Iowa Bank needs an experienced EX­
Northwestern Banker.

Temporary Bank Building with canopies for sale.
Available Spring 1986
Equipment Optional
If Interested please call
Dennis Prchal at (612) 224-1371

Ben E. Marlenee
913 Locust
Des Moines, Iowa 50309

PRESIDENT—$25mm profitable IA ag bank near
metro. Need strong mgmt, PR, & credit skills.
$55 K.
COMMERCIAL LENDER— head commercial dept,
possible SrLO position in $60mm metro area.
$45 K.
Contact Barbara J. Ritta at
P.O. Box 24227
Omaha, NE 68124
1-800-225-2885, In NE (402) 397-2885
Thank you for your patronage.

AGRI-LOAN - senior lender for $40MM Ag Bank. Work oi
loan experience desired.
COMMERCIAL LOAN ■ middle management position wii.
$100MM+ suburban bank. Need two-four yrs. experience
SECOND OFFICER - Ag-oriented bank with large catt!
loan portfolio. Previous administration experience a plu?
COMMERCIAL/INSTAL. LOAN • community bank witr>
large retail base. Time will be split evenly between corr
mercial and instal. credits.
CREDIT OFFICER - develop and oversee credit dept, to
growing suburban bank. Good advancement possibilitie
$ 20'


317 6th Ave, Ste. 650
Des Moines, IA 50309
(515) 244-4414

2024 Swift - Box 12346
North Kansas City, MO 64116
“ Serving the Banking Industry Since 1970”

Vol. 14 No. 37 Northwestern Banker Newsletter (USPS 873-300) is published weekly by the Northwestern Banker Company, 1535 Linden
Street, Suite 201, Des Moines, Iowa 50309, (515) 244-8163. Subscriptions $1.00 per copy, $18.00 per year. Second class postage paid at
Des Moines, Iowa. Address all mail subscriptions, changes of address (Form 3579), manuscripts, mall Items to above address.
Federal Reserve Bank of St. Louis