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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 B y EDW ARD J. W ILLIA M S President Robert Morris Associates and Treasurer Brown Brothers Harriman & Co. New York City Background— 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 bill. 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 ASK JERRY TRUDO to make MNB work for you. Toll free: 1-800-332-5991 hants National Bank m F.D.I.C. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis A 'BANKS OF IOWA’ BANK Norwest Bank Des Moines, N.A. NORWEST BANKS vf C a ll (515) 245-3131 o r to ll-fre e (800) 362-2514 Member FDIC Teamwork: 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 Make The National Bank o f W aterloo your custodian bank! ►The national Bank o f W aterloo is an approved custodian bank for the state o f Iowa. *Fast, efficient com puterized reporting system . ► Provides pledging system to secu re public funds. *Low, low m onthly fees under our system . https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Call: 319-291-5235 for complete details. Write: Attn: Don Stonewall, Vice President The National Bank of Waterloo 100 E. Park Avenue Waterloo, IA 50703 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 1986. 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 t a m 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 quidated. 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 Oberts. 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 tion. 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 https://fraser.stlouisfed.org 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 MENOMONEE FALLS: A t F&M 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. -J AG BANKING PERSONNEL SPECIALISTS BANK POSITIONS 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 to 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. $35,000. FREELAND FINANCIAL SERVICE, INC. Fees Paid by Employer CONFIDENTIAL No contacts made without prior consent & approval. 1010 Equitable Building Des Moines, Iowa 50309 Jh Ag Banking Specialists: WANTADS 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 revealed. Purchase of Collections Sale of Rare Coins Reliable and respected service for over 20 years NORTHWESTERN BANKER 1535 Linden St., Suite 201 Des Moines, Iowa 50309 Phone 515/244-8163 POSITIONS AVAILABLE 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 GUMBERT EXECUTIVE EXCHANGE, INC. 11246 Davenport Street Omaha, NE 68154 Phone: 402/330-3260 Member National Personnel Associates We're Nationwide BANKERS AVAILABLE 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. $50K. 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. COMMERCIAL VICE PRESIDENT - Senior lender with MBA 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. PARTIAL LIST OF AVAILABLE BANKERS FOR FURTHER INFORMATION CONTACT: KURT ROSENCRANTS AT (515) 244-44\4 WORLD’S LARGEST BANKING, FINANCIAL & EDP SPECIALIST 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. (PA) $55MM Northeast Iowa Bank needs an experienced EX ECUTIVE VICE-PRESIDENT. Send resume to WEA c/o Northwestern Banker. (PA) FOR SALE 24x60 Temporary Bank Building with canopies for sale. Available Spring 1986 Equipment Optional If Interested please call Dennis Prchal at (612) 224-1371 (FS) Ben E. Marlenee Coins 913 Locust Des Moines, Iowa 50309 515-243-8064 BANKING OPPORTUNITIES 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 PROFESSIONAL RECRUITERS, INC. P.O. Box 24227 Omaha, NE 68124 1-800-225-2885, In NE (402) 397-2885 Thank you for your patronage. ★ SEASONS GREETINGS ★ POSITIONS AVAILABLE AGRI-LOAN - senior lender for $40MM Ag Bank. Work oi loan experience desired. $38 COMMERCIAL LOAN ■ middle management position wii. $100MM+ suburban bank. Need two-four yrs. experience $28$ SECOND OFFICER - Ag-oriented bank with large catt! loan portfolio. Previous administration experience a plu? $40. COMMERCIAL/INSTAL. LOAN • community bank witr> large retail base. Time will be split evenly between corr mercial and instal. credits. $25> CREDIT OFFICER - develop and oversee credit dept, to growing suburban bank. Good advancement possibilitie $ 20' ALL INQUIRIES CONFIDENTIAL PLEASE FORWARD RESUME. TOM HAGAN & ASSOCIATES 317 6th Ave, Ste. 650 Des Moines, IA 50309 (515) 244-4414 ALL FEES COMPANY PAID 2024 Swift - Box 12346 North Kansas City, MO 64116 816/474-6874 “ 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. 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