The Salina Journal from Salina, Kansas on February 2, 1986 · Page 63
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The Salina Journal from Salina, Kansas · Page 63

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Salina, Kansas
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Sunday, February 2, 1986
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Page 63
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The Salina Journal Sunday, February 2,1986 Page S27, Diversified economy eases pinch on Salina banks 4 By LINDA MOWERY-DENNING Great Plains Editor A faltering farm sector contributed to economic unrest last year in rural Kansas. But Salina bankers say a diversified local economy leaves them stronger than their country cousins. Shrinking values for land and other farm assets and dismal commodity prices were two of the factors that pushed farmers and, in many cases, their rural banks to the brink of collapse. Many went over the brink. Kansas tied its neighbors, Oklahoma and Nebraska, for the most bank failures in the nation in 1985. The three states each had 13, many of them in small rural communities. The Sunflower State also logged the nation's first bank failure of 1986 — the First National Bank of White City, which reopened a day later as a subsidiary of Herington Bancshares Inc. It was not only the failed banks that felt the pinch of a farm depression, however. The Federal Reserve Bank of Kansas City, which covers Kansas, Missouri, Nebraska and Oklahoma, reported that agricultural credit conditions continued to deteriorate during the third quarter of 1985, the most recent period for which figures are available. The statement was based on a survey of 166 district .banks. ; Fifty percent of the bankers reported loan repayment rates had plowed from a year earlier. At the ;same time, requests for loan renew- Finance "Salina is diversified and as long as we don't get too many of our economic units in trouble, we may hurt but we still have basic strength in our community." —Gerald Shadwick "Generally the agricultural situation in the Midwest during 1985 has not been good," said Ralph Rundquist, president of the Assaria State Bank. "This affects the entire economy. Many business establishments have closed or are in a depressed condition. "I have said for many years 'if you take the corn, wheat and cattle out of Saline, McPherson and surrounding counties, the cities in those counties would blow away.' " Kansas farmers owe about $8.7 billion, 31 percent of which is held by commercial banks. Some forecasters say it is possible $1 billion to $2 billion of that amount will never be repaid. There is good news, however, especially in the Salina area, where bankers say they have felt the pressure of a weak farm economy but not to the same extent as their country cousins, who are dependent on farm loans to keep in business. All four Salina banks reported mid- "None of the banks in Salina is that heavy into agriculture. One of the things I'm impressed with (in Salina) is the diversity of the labor force. It's pretty well distributed... and that's a plus." —Gary Rumsey als and extensions increased. Seventy-three percent of the bankers said they required more collateral for non-real estate farm loans than a year earlier. The same bankers also reported that 3.1 percent of the farmers and ranchers in the district were forced off their land between June and November. This percentage was three times what they considered normal. Partial liquidations because of financial stress also remained common during the same period. Bankers reported that 5.1 percent of the district's farmers sold part of their capital assets to keep the remainder of their operations afloat. That figure was nearly five times what the bankers considered normal. , Another indicator of the troubled , times some banks faced was the mid:year figures collected by government regulators. Of the 621 banks in Kansas, 22 had more money in problem loans than in capital. year profits. At the same time, the percentage of their nonperforming loans to capital ranged from 7 percent to 35 percent. The Federal Deposit Insurance Corporation defines a farm bank as one with 25 percent or more of its loan portfolio in agriculture. On the average, Salina banks have from 10 percent to 14 percent of their loans in agriculture. Planters Bank and Trust Co., 138 N. Santa Fe, for example, is at the low end of the farm loan scale with 10 percent. The biggest share of its funds is invested in real estate, consumer and commercial loans. ' 'None of the banks in Salina is that heavy into agriculture," said Gary Rumsey, president of Planters. "One of the things I'm impressed with (in Salina) is the diversity of the labor force. It's pretty well distributed ... and that's a plus." Rumsey said Planters was made even stronger this year when it was purchased by Fourth Financial Corp. of Wichita. The sale made the Salina bank one of the state's first financial institutions to become part of a multi- bank holding company. Fourth Financial Corp. also owns Kansas' largest bank, the Fourth National Bank and Trust of Wichita. The multi-bank holding law, which was passed during the last session of the Legislature, also allowed the corporation to purchase banks in several other communities, including Topeka. ' 'The diversity we have lends to our stability," Rumsey said. "If we ever would have any problems, we could draw on the support (of the Fourth Financial Corp.)," Rumsey said. Another Salina bank, First Bank and Trust Co., 235 S. Santa Fe, probably has few farm loans because it has only been in business for 25 years, said Lloyd Davidson, president. "Farmers don't move around much," he said. At the same time, he said his bank has suffered loan losses in its chief areas of activity — small business, real estate and commercial loans. But the losses have not been substantial. "They've been relatively minor and probably pretty typical if we look back over the years," Davidson said. "I think the economy in Salina has done pretty well considering the basic Kansas economy. "Some areas are strictly agriculture and they don't have anything else to fall back on. It hurts here, but not to the magnitude it does in other communities.'' Nick Hoffman, chairman of the National Bank of America, 100 S. Santa Fe, and Gerald Shadwick, president of the First National Bank and Trust Co., 101 N, Santa Fe, tell a similar story. "The larger the community, the more diversified it's going to be," Hoffman said. Shadwick points to construction activity in Salina as an indication of the city's basic strength. He cites the new Holidome, Skaggs Alpha Beta store and Central Mall as reasons for optimism. Shadwick said Salina also is fortunate to have a mix of in dustries, everything from Tony's Pizza Service to colleges to hospitals. "A lot of fanners have been hurt and I think most of the retailers are feeling the pinch," he said. "But Salina is diversified and as long as we don't get too many of our economic units in trouble, we may hurt but THOUGHT Putting in some overtime at the office? Burning the midnight oil in the dorm? Or just plain hungry? Why not take a break with a delicious pizza from Domino's Pizza. One chock-full of your favorite ingredients-tasty cheese, tempting sausage, zesty pepperoni-or a variety of other great toppings on a golden-brown crust. And it's delivered to you free in our exclusive "hot box" in 30 minutes or less. So give us a call today. We've got just the taste you have in mind. Three for Two! Get three toppings for the price of two toppings on a 12", small pizza! Limited delivery area. One ofter per order. Good at listed locations. Expires: May 15. 1986 Salina 827-0666 1103-C W.Crawford 825-7060 582 S. Ohio Street OPEN FOR LUNCH! Hours: 11 am-1 am Sun.-Thurs 11 am-2'am Fri. &Sat. 0**. >X. , t DOMINO'S PIZZA DELIVERS" FREE. we still have basic strength in our community." Shadwick said his bank saw a decline in loan demand during 1985 — despite a drop in interest rates. He attributes the slump to a concern over the general economy. "People are worried about getting in debt until they see that the economy is on the upswing and the earnings can justify the expense," he said. One problem ( that continues to plague lenders '— especially those who depend upon agriculture for 'their lifeblood — is declining values for land and other farm assets. The American Farm Bureau Federation reported the nation's farm assets fell in value an additional $40 billion in 1985. In the Salina area, Dennis Riordan, an auctioneer whose family owns the Solomon State Bank, estimates that land prices have tumbled 50 percent from their peak in 1981. He said those lenders who pretty much ignored cash flow projections and profits and bet on continued inflation are now taking an economic beating, along with many of their farm customers. Riordan said his bank does not fall into that category because during the high-flying days of agriculture in 1970s, a time when many lenders were greedy for farm loans and encouraged expansion, the Solomon bank started to diversify. "We have a very conservative loan policy and our loan losses have been very small," he said. "Banks that have a diversified loan portfolio don't have the ups and downs a farm bank does." The Bennington State Bank, with about 50 percent of its loans in agriculture, is a true farm bank, according to the FDIC definition. Vice President Dwayne Walls said At the same time, Walls said many •• of his customers have not ex* perienced the crop failures that have • been so common in eastern Kansas > and parts of the northwest. As tough as 1985 was, however, ^ Walls said he does not see much hope' "We have worked more closely with our farm customers. We have required them to do a better job." —Dwayne Walls his bank has survived the slump in agriculture, along with the majority of farmers in the Bennington area. "All farm loans today are worrisome, but it's not a real high percentage we think we're in trouble on," he said. "I don't think we have a lot of people in Bennington who are going to sell out. This area hasn't been quite as hard hit as some others." Walls said his bank began stressing cash flow when interest rates started to climb. "We have worked more closely with our farm customers," he said. "We have asked for more credit information and made them produce more cash flow information. We have required them to do a better job. "There's nothing wrong with getting bigger as long as you analyze your expenses and make sure getting bigger is profitable." for improvement in the year ahead. He expects prices for land and farm commodities to remain soft. "I think 1986 could be a worse year for farmers and farm income than 1985 was, "he said. : Because of Kansas' 13 bank failures last year, Harold Stones, executive vice president of the Kansas Bankers Association, said he has kept a close watch for any sign that. Kansans are starting to lose confidence in their banks. So far, he hasn't seen any. He said the large majority of Kansas banks are on solid financial footing. ; "Thirteen bank failures is 13 top many, and in some cases, the failure delivered an almost death blow to the; community," Stones said. "But you; also have to keep in mind that those- 13 banks accounted for only 1% per-" cent of the total deposits in the^ state." Taxes (Continued from Page S25) ago," Stedry said. "I do not see where the state's going to get the money, without the sales tax. "Whether we get the sales tax or not... we'll still be here and we'll still have dollars. It's just a question of how many dollars you want to have. "Without the sales tax, there isn't going to be any increase in funding for programs." Although the legalization of betting on horse races and a state lottery could bring more dollars for public schools, districts wouldn't be able to predict how much they would get. The district has few options available to cut expenses, because 84 percent of the general fund expenses are tied up in salaries and fixed charges. When insurance and other necessities are accounted for, officials have just 6 percent to 8 percent of the fund from which to cut, Stedry said. "We are not running a Cadillac operation," Mulvenon said. "We are running the third or fourth most efficient operation in the state, and we can prove that by looking at the per- pupil expenditure.'' Budget cuts could mean classes of more than 35 students or classes in which two grades are combined, Stedry said. Schools (Continued from Page S25) field they are teaching. The measure affects four instructors teaching six general education courses, Gary Talley, Brown Mackie president, said. Talley told the committee that several of the instructors who board investigators believed were not qualified have been replaced since the review. Another review of the school could take place this summer in preparation for final action on the request, Hammond said. Brown Mackie now awards certificates to graduates of courses that last 90 days to a year and diplomas to graduates of courses that last a year to 18 months. Brown Mackie also got some welcome news from the regents in 1985, the news that its 383 Salina students and the 182 students at its Kansas City branch school are eligible for state tuition grants. Those enrollment totals, Talley said, represent a 21.6 percent increase in enrollment at Salina and a 180 percent increase in enrollment at Kansas City, which grew from 65 to 182 students this year. State tuition grants of up to $1,200 a year, administered by the regents, are offered only to students at the state's independent colleges. Fiftysix Kansas schools applied to be included in the grant program this year but Brown Mackie was the only new school approved. At the Salina Area Vocational- Technical School, officials used a" portion of their state-approved allotment of $40,000 in capital outlay funds to purchase two computer- aided drafting systems at a cost of $24,000, said Chuck Scott, public relations coordinator. ; The addition of the systems im4 proves tremendously the quality of education offered drafting students" Scott said. The vo-tech school was also able to increase its share of capital outlay funds by matching them on a 50-50 basis with federal funds from the Carl Perkins Act, designed to help schools upgrade their technology. * "That way we've taken a relatively small amount of money and built it into a sizeable amount of money," Scott said. ; High school enrollment increased 11 percent at the school this year, from 222 to 247, Scott said, despite a trend for decreasing secondary enrollments. Overall enrollment at the school, which takes in secondary and post-secondary students not just- from Salina, but surrounding areas, was down three students, from 580 to 577. School Specialty Supply, Inc. 55 Vears Of Growth The "Specialty" in School Specialty Supply comes from a humble beginning in 1931 as a supplier of school forms and special printing needs to schools in Kansas. School Specialty Supply has grown to become an international distributor of supplies and materials to schools, business and industry. •School and Office Supplies •Office Furniture 'Greeting Cards • Wedding Stationery 'Calculators • Instructional Material and Teaching Aids • Art Supplies •Book Department Limited delivery area. Good al lisled locations Our drivers carry less lhan $10 00 Salina Retail Store • 214 S. Santa Fe Phone 825-1641 The School Specialty warehouse, located in the South Industrial Area, ships school supplies, equipment and materials to every state in the U.S. and many foreign countries. Please feel welcome to schedule an individual or group tour through the facilities. Warehouse: 3525 South Ninth Salina, Kansas Phone 827-0451 School Specialty believes in Salina and its continued growth. : 1986 Domino s Pizza, luc

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