1939

End Public's Fear of Banks, Adams Urges

Feb. 11 — One of the great problems facing the banks is the elimination from the minds of the public that it is hard to borrow from a bank, the American Bankers Association Regional Conference heard Roger W. Adams declare here today.

Mr. Adams, who is cashier of the State National Bank at Frankfort, Ky., discussed the "Loans of a Country Bank," and dwelt on the methods used in his institution.

"How this should be accomplished, I cannot say," declared Mr. Adams in discussing the problem of overcoming public fears. "However, I feel that it is purely a matter of public education on the part of both parties concerned. We must use every available means at our disposal to educate the public in realizing that banks are anxious to co-operate with them in their credit needs, and we must educate ourselves in being the human beings that we are, and not the dignified impersonal and unsympathetic bankers which we are believe to be.

"We at our bank attempt to put the customer at ease as quickly as possible by allowing him to state his case immediately. We then engage him in conversation, in which he does most of the talking, and in this way the questions which you ask do not appear so pointed. It is so easy to become interested in his problem if you will allow yourself to do so. After a short conversation, if the credit can be granted, we say yes quickly; if not, we discuss it longer to determine if we can assist him to get his affairs in order to enable us to extend the credit later. In any event, he is informed of the reason behind the refusal and understands why the credit cannot be granted.

"We try to help in every case, either through a loan or by constructive suggestions when refusal is necessary. I do not think that a greater compliment can be bestowed upon a loaning officer than to have an applicant who has been refused credit say, 'He did not let me have the money, but he told me why and showed me how to adjust my affairs so that I may get it later.'

"Since the theme of this conference is meeting the public needs in banking, I should like to cite just two instances where we attempted to meet a need and by so doing increased our earning assets as well as made some new friends.

"Last year we learned that some of the farmers in our county were using the Government-sponsored Central Kentucky Production Credit Association, which was located in a nearby city, to purchase livestock, mostly sheep. We felt that some plan could be evolved whereby we could handle at least a part of this business to the entire satisfaction of the farmer and the bank. With this in mind, we contacted one of our prominent farmer customers and discussed the matter with him. As a result of this discussion we agreed to furnish the money for him to go out West and buy some Montana ewes, which he was to sell to reliable purchasers upon his return. We further agreed to handle the notes that he would take in payment for the sheep. These notes, secured by a chattel mortgage upon the sheep, were made payable to him and we discounted them. The proceeds from the discounts, as well as the cash received from the sale, were used to liquidate his original note.

"The ultimate result was a benefit to our farmer customer in the form of the profit obtained through the turnover of the sheep; a benefit to the bank in the form of increased earning assets, secured by the maker, the endorser and the livestock; and a benefit to the purchasing farmer in the form of credit obtained for the purchase of the sheep with considerably less trouble and 'red tape.'"

Turning his remarks to the subject of automobile financing, Mr. Adams related his experience with a dealer as follows:

"He very readily and willingly agreed to let us have access to his records, and we began our survey. As soon as we had obtained the details of each financed deal, we obtained the assistance of a local insurance man in working out the insurance costs on each sale. With all the detailed work completed, we set out to construct a plan with the object in mind of greater monetary benefit to the dealer. By using the same finance charges and figures and manual rates on insurance coverage, we found that we could increase the dealer's income an average of better than $4 per car sold and financed. But under this plan, the bank would not assume any responsibility other than diligent efforts to collect the paper, which was to be taken at 6% discount and with recourse. He made a survey of his records to get an estimate on responsiveness, and accepted our proposition.

"We also financed his floor stock under a trust receipt agreement. To date, the bank, the dealer and the customers served are well pleased with the plan.

"We have considered the prospects of financing individual purchases. In this connection we availed ourselves of the information obtainable from the daily checks to obtain a basis for the number of prospects available among our own customers.

"We carefully examined the daily items for a period of two months, recording all customer checks in payment of car installments. With this information in hand, we next examined the county clerk's records of chattel mortgages for a period of 18 months to obtain the original amounts and dates of the contracts. It was then a simple matter to determine the number of payments and the maturity date of each contract. This has been projected into a maturity schedule, ready for use should we decide to go after this business. We would, of course, after investigation of the prospects listed, solicit only those considered desirable risks.

"It may interest you to know the result of our survey in dollars and cents.

"During the 18 months, customers of our small bank had contracted to pay over $75,000 to finance companies on purchased automobiles. We will admit that we were somewhat amazed. However, we are not going to jump into this plan. We believe in the old adage, 'Be sure you are right, then go ahead.' We want to obtain a background of experience on the dealer's plan first, and if that is satisfactory from all angles, we shall seriously consider the other.

"In conclusion, I wish to say that this paper does not begin to cover the problems which we country bankers encounter in making loans in a country bank. I have attempted to point out what I believe to be some of the essentials in extending credit in a country bank. They may seem very elemental to some of you, but after all is said and done, country banking is elementary banking and we cannot get around that fact."