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Vol. 11 No. 33 Des Moines, Iowa December 6,1982 With Recovery Now in Slow Stage Business Borrowing to Start Soon ( ( T H E Y E A R 1983 will be the I toughest year for the hanking industry since World War I I ,” ac cording to the analysis given last month by Dr. Roy E . Moor, senior vice president and chief economist for The First National Bank of Chi cago. Speaking at the bank’s 36th Conference of Bank Correspondents, Dr. Moor set the stage as the open ing speaker at the first session with his forecast. He looks for a slight loan demand pickup in the second half of 1983. A summary of his com ments follow: ‘‘We think the economy already is in the slow stage of recovery. We see the classic phenomenon of that— softness in business borrowing. As sales pick up, cash flow picks up, lessening borrowing needs, and bus inesses try to hold down inventory; so there is less borrowing, less capital expansion while they try to maximize their financial recovery from recession. “There is tremendous competi tion from foreign markets for ag sales. Our crops are up in volume, and in price due to a stronger dollar. “Credit risks classically rise dur ing a recovery and bankruptcies will increase during 1983. It will be tougher than 1982. “However, for some there is a sil ver lining. We see a classic pattern of recovery. When business custom- ers begin to borrow again, they start with their home banks; so, if you have business accounts in your area you can expect them to start bor rowing soon. “ In addition, non-business bor rowing is expected to increase— perhaps 20% more in mortgage lend ing in 1983 over '82. There is a de ferred demand in new construction and in the present inventory of houses. One tricky area is the change in instruments to finance mortgages. “Consumer purchasing of autos and other durables will be about a 7% increase over 1982. There is a tremendous deferred demand out there on cars. “Further good news is that area consumer household balance sheets have improved the last couple of years. Savings are up, and people are paying down their outstanding debts, making for more financially healthy consumers who are more able to borrow than any time since 1979. “We have seen a 4Vi% deposit growth through large CDs over the past year. In the area of individual deposits, the new regulation per mitting banks to offer a money mar ket account means banks will have to compete with financial institu tions offering these accounts. B y the same token, banks have a tremen dous advantage now because they can be a one-stop shop and can draw funds back to the hometown bank. We must recognize clearly the pub lic’s intense sensitivity to interest rates, leading to disintermediation of funds, even within our own in stitutions and between institutions, whichever offers the best deal. “Let me issue you a warning re garding this aspect of 1982. The ex traordinary conservatism of house holders has led to keeping funds in savings accounts or NOW accounts. I feel this was associated with the recession and was induced by cau tion. As the recovery continues, I think these people will reverse and look for greater return. “In the area of costs, wages and salaries in 1982 over 1981 went up 6%, the lowest in some years. Our forecast, and I think you should take this seriously, is that those numbers in 1983 over 1982 will be down to a 4Vi% increase. This re flects a lower anticipation of the in flation rate. We expect inflation to be lower next year—below 5%. “A major increase in costs for banks will be for the withholding of tax on interest and dividends, de spite the rule that you won’t have to aggregate accounts. “Fed policy in 1983 generally will be like 1982—some accommodation to M l, but mostly attuned to aggre gates. Deregulation brings things we like, but also competition. It has happened to every industry dereg- CALL ON THE “PERFORM ANCE TEAM ” where com m on transactions !I are handled uncomm only well. FIRST NATIONAL LINCOLN 13th & M Street https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Lincoln, Nebraska 68501 • Member, F.D.I.C. 2 Team w ork: One of the reasons we’re first in Iowa. IOWA I DesMpines Bob Buenneke Mem ber FDIC SPECIAL NOTICE! The Annual Management Confer ence and Duck Dinner hosted by North western National Bank of Minneap olis will be held as scheduled on Thursday, December 9 at the Hyatt Regency Hotel in downtown Minne apolis, according to Don Pederson, vice president and head of the cor respondent bank division. He said the conference will be unaffected by the Thanksgiving Day fire that disabled the main bank building. The formal program starts at 1:15 p.m. as pre viously scheduled, followed by a re ception and the Duck Dinner begin ning at 6:00 p.m. Terri Stearn Note D epartm ent Toll free 1- 800- 332-5991 Merchants A National Bank 151 Member F.D.I.C. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis A 'BANKS OF IOWA’ BANK • Iowa News CLINTON: Bruce M. Dunlap, a 1974 graduate of the University of Iowa Law School, who joined First National Bank here last March, has been appointed vice president and trust officer, according to J.L . Menges, president. He succeeds Thomas K. Killion, who has been named chairman of Hawkeye Bancorporation’s trust division. DENISON: David Olson has joined First Northwestern National Bank as a vice president. He was formerly assistant vice president at First Northwestern Bank of Red Wing, Minn., where he managed the ag lending and human resources depart ments. to make MNB work for you. m An Affiliate of Northwest Bancorporation BANCO 0 Call (515) 245-3131 or toll-free (800) 362-2514 COUNCIL B L U FFS: First National Bank directors have elected Willard J . Lenners vice president and man ager of commercial lending and ulated. We don’t anticipate any Thomas D. Johns vice president-real change in Fed policy, whether Chair estate. Mr. Lenners was with Bank man Paul Volcker stays or goes after West N.A. in Pierre, S.D., for 12 August 1,1983, and I don’t expect a years before joining First National. legislative change on rule over Fed Mr. Johns previously was regional eral Reserve policy.______________ manager for American Charter Fed eral S&L. ASK T E R R Y M A R T IN Don't gam ble when choosing o correspondent bonk. Come to the professionals. M ELVIN: Thomas E. Benz, presi dent and chairman of Melvin Sav ings Bank, died November 19. He was four days shy of his 91st birth day. Mr. Benz began his banking career with Melvin Savings Bank in 1916 and served there 66 years. STRATFORD: Citizens National OF DES M O IN ES . N A ■ M E M B E R FDIC ■ (51 5) 245-7 11 1 AFFILIATED W IT H UNITED CENTRAL BANCSHARES, INC. ^ TOLL FREE NUMBER (800) 362-1615 Bank of Boone, a Hawkeye Bancor poration affiliate, has been given ap proval by the Comptroller of the Currency to acquire Farmers Sav ings Bank of Stratford. Farmers Savings Bank will be merged and the combined name will be Citizens National Bank, Boone-Stratford, with total assets in excess of $70 million. An office will be retained in Stratford, the 88th Hawkeye loca tion in Iowa. • • Nebraska News KILGORE: The Farmers State Bank has received approval to establish a remote service facility in Valentine. The ATM is located at 273 North Main in Valentine and began roundthe-clnck ¡service December 1. LINCOLN: Donald W. Weber, an employe of the Comptroller of the Currency since 1977, most recently as an associate national bank ex aminer, has been promoted to na tional bank examiner. A native of Lincoln, where he will remain headquartered, Mr. Weber is a graduate of the University of Nebraska. STANTON: Richard G. Fox, former ly with the FDIC, has joined The First National Bank as a vice president. Professional ... Responsive... Call Mark Christen for an j correspondent service. Call toll free (800) 622-7262 Valley National Bank ili DES MOINES. IOWA 50304 A BANKS OF IOWA BANK Member FDIC • # £ iFH utton One Carriers Building Des Moines, lowa 50309 Telephone: (515) 243-1203 We own and offer subject to prior sale and change in price and subject to our attorney’s approving opinion: S&P: A $ 750,000 IOWA STUDENT LOAN LIQUIDITY CORPORATION ® Floating Rate Student Loan Revenue Bonds 1981 Series A DATED: • April 15,1981 DENOMINATION: multiples of $5,000 The bonds will be in fully registered form with interest payable quarterly. Next interest payment date is March 1, 1983 and quarterly thereafter, 6/1, 9/1 and 12/1. Interest from December 1, 1982. IN THE OPINION OF COUNSEL INTEREST ON THESE BONDS IS EXEMPT FROM ALL PRESENT FEDERAL INCOME TAX AND ALL PROPERTY TAXATION IN THE STATE OF IOWA. $750,000 ^ 6.25% Price 91.00 Maturity March 1, 1996 Callable March 1, 1988 at 102% # * The bonds will bear interest at the rate of 6.25% from December 1,1982 to March 1,1983 and thereafter at a rate which will fluctuate quarterly based upon 75% of the average bond equivalent rate for 13 week U.S. Treasury Bills auctioned during the quarter immediately preceding each payment date (3/1,9/1 and 12/1) rounded upward to the nearest 1/20 of 1 % . IN NO EVENT WILL THE INTEREST RATE BE LESS THAN 6% OR GREATER THAN 13 1/2% PER ANNUM. The 1981 Series A Bonds are being issued for the purpose of providing funds to purchase existing or newly originated student loans from eligible lenders under the lowa Student Loan Liquidity Corporation Purchase Pro gram. The proceeds will also be used to fund the Debt Service Reserve Account, to fund the Loan Reserve Ac count, to capitalize approximately 7Vz months operating expenses and to pay costs of issuance. All student loans purchased from the proceeds of the Bonds must: Be originated and serviced under the provisions of the United States Higher Education Act. • Be 100% guaranteed by the lowa College Aid Commission and reinsured by Federal Government or 100% guaranteed by the Federal Government. Have a rate of interest no less than 7% and be eligible for Federal Special Allowance and Federal Interest Subsidy. Legal opinion: Belin, Harris, Helmick & Heartney, Des Moines, lowa, Bond Counsel to the Corporation. Certain legal matters have been passed on for the Underwriters by their counsel, Hawkins, Delafield & Wood, New York, New York. The information contained herein is not guaranteed, but is derived from sources we deem reliable and is that on which our purchase of these bonds are based. Bonds of a particular maturity may or may not still be available or may now be available at a price or yield different from that indicated above. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Supplement to Northwestern Banker Newsletter 12-6-82 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis • • ® • ® If you’ve been eyeing the lucrative leasing market you know what it would cost. Before you even book your first lease you could pay up to $50-150M for legal research, qualification requirements, data processing programs, promotional materials, and an expanded staff. Yet hundreds of banks just like yours are getting into leasing. What’s the key? The key is Bank Participation Leasing from Col lateral Financial Services. With Collateral Financial Services’ help you can add a lease program without adding to your staff. CFS takes care of the billing, collecting, taxes, marketing, documenting, and finan cial reports. They also provide the training you need to determine the lease contract and the amount of investment you would like to make in the lease. (You can make an investment of as little as 10% or as much as 75%). With Bank Participation Leasing you serve valued customers on a direct, personal basis. You attract new customers. And you can do it without high start-up costs. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Open the door to your own leasing program, call CFS or send in the coupon below. CO LLA TERA L F IN A N C IA L S E R V I C E S IN C . I want to find out how easy it is to enroll in your leasing program. Send me the brochure “How To Tap Into The $150 Billion Leasing Market.” n w Bn 1 2 *8 2 j Name____________________________ Title__________________ Institution______________________________________________ Address_________________________________________________ City________________________State________ Zip____________ Mail to: COLLATERAL FINANCIAL SERVICES INC. Supplement to Northwestern Banker Newsletter 12-6-82 Corporate Offices 444 Lafayette Road St. Paul, MN 55101 612/222-7792 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis
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