Some bankers happy about election resultsBankers can take...

BANKING & FINANCE

November 05, 1992|By David Conn

Some bankers happy about election results

Bankers can take heart from President-elect Bill Clinton's remarks last week -- when he was merely candidate Bill Clinton. Vowing to end the so-called credit crunch, he told voters in Michigan, "The government's regulatory policy is responsible for a real slowdown in economic activity."

So are Maryland bankers heartened by the results of Tuesday's election? Well, yes and no.

"I think it's a good thing on balance," said Arthur Silber, president of Sterling Bank & Trust Co. of Baltimore. "In my opinion, the Bush administration was doing absolutely nothing toward recognizing or dealing with the problems of the economy."

But he added that despite the pending change at the top, the economy is bound to get worse before it gets better.

Edward K. Dunn Jr., president of Mercantile-Safe Deposit & Trust Co., said he was impressed by Mr. Clinton's knowledge of some details of banking regulation, as expressed in the debates, and with his insistence that the industry is not about to collapse.

"We are creatures of the economy, and if he's successful, as he clearly intends to be, then we're in great shape," said Mr. Dunn, adding that he has no idea whether Mr. Clinton will succeed.

Others were more circumspect.

Arnold G. Danielson, president of a Rockville bank consulting firm that bears his name, suggested Mr. Clinton will be less obsessed with keeping interest rates low, and higher rates would hurt banks' net interest margins. But he believes the industry is on the mend anyway and can look forward to nothing worse from the new president than a little benign neglect.

"I wish our president-elect well," said Charles W. Cole Jr., president and chief executive officer of First Maryland Bancorp, "and my hope is that our nation will not be mired in an extended period of slow growth, which could result from a 'tax and spend' philosophy."

Avemco purchases insurance agency

Frederick-based Avemco Corp., primarily an aviation and marine insurer, took a step closer to the banking industry this week with the purchase of an Illinois insurance agency. First Security Planners Inc. of Chicago specializes in the relatively arcane field of "collateral protection insurance" for lending institutions.

The three-person agency, with about $3.5 million in premiums, sells coverage for installment loans, typically for automobile purchases. The agency either tries to get borrowers to buy insurance for their cars or finds insurance for the bank's collateral when the borrower fails to buy it. The bank can collect on the policy if the collateral, namely the car, is damaged.

The company will operate as a division of Avemco's Lutherville-based Matterhorn Bank Programs Inc., which sells blanketinstallment loan coverage to lenders. Matterhorn, acquired in 1984 when it also boasted more than $3 million in premiums, has roughly tripled in size since then.

5 banks, 17 thrifts pegged with problems

The banking industry may not be "on the brink," as a much-debated study recently suggested, but that doesn't mean there aren't a host of institutions to worry about.

Bauer Financial Reports Inc., a Coral Gables, Fla., banking research company, compiles quarterly ratings of the financial health of the nation's federally insured banks and thrifts. Its latest report, dated Oct. 23, names five banks and 17 thrifts in Maryland that are either undercapitalized or "troubled." That means their capital is significantly below regulatory minimums, or would be if current trends continue or worsen.

Making it onto that list does not necessarily mean an institution is below regulatory capital requirements, said Karen Dorway, Bauer's director of research. But "even if it does meet them, there are other things going on of concern at the institution," she said.

(For free information, call (800) 388-6686.)

Across the nation, Bauer found 67 institutions that were "critically undercapitalized" on June 30, Ms. Dorway said. One of them is in Maryland: Second National Federal Savings Bank, which had a core capital ratio of 1.09 percent, well under the required 3 percent.

"We are progressing," said Bill Russell, chief financial officer of Salisbury-based Second National. "We have had lots of discussion with potential capital sources."

The company expects to release third-quarter results on Monday, he said, adding that only owners of Second National stock should be concerned about the company's future. Depositors are federally insured up to $100,000 per account.

Many laid-off bankers leave the industry

Where do laid-off bankers go? That question takes on urgency as the industry's rapid consolidation continues. The answer, says a recent report, is that only about half go to other banks.

The study, by outplacement firm Lee Hecht Harrison, shows that 47 percent of laid-off bankers found new jobs outside the industry. "Although some bankers may already be predisposed to pursue other career options, the reality is that the U.S. banking industry no longer has the need or ability to reabsorb a growing percentage of the employees being laid off due to ongoing consolidations, rapidly changing technology and new skills requirements," said Lee Hecht Vice President Penny Shaw.

Of those who stayed within the industry, 71 percent went to work for U.S. commercial banks, and 22 percent went to foreign banks. The rest ended up at thrifts or savings and loans.

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