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iv ;• OCTOBEH 10.1979 Credi t ,Department: f rom the lef t -Chr ist ine B raem, Cheryl M owrer, .* J ohn Murphy, ass t . v ice president, seated, "We're From Missouri" Virginia Mroz, and Yvonne Ryden, credi t of f icer. Credit Is The "Show Me" Department a I L I A credit department reduces the risks of lending money by helping officers, to determine if a borrower hap.the ability to repay a loan. McHenry State Bank has its Credit Department, headed by assistant vice president John Murphy and credit officer Yvonne I. Ryden, which competently performs this function. Murphy notes that with Christine Braem, Cheryl Mowrer and Virginia Mroz, his department routinely exchanges credit inquires with other banks and credit institutions, prepares current documentation justifying extending loans to applicants, taking charge of collateral, and accepting or releasing it along with appropriate records. His people also process guaranteed student loans, maintain insurance files and policies on mortgages, homeowners' policies, bank insurance and employee insurance. Yvonne Ryden is the credit review officer who helps loan officers make their determ inations, while Murphy is the compliance officer who ensures that loans are made in compliance with stateand federal regulations and that there is no discrimination. He also monitors bank policy and recommends needed modifications to the board. * Murphy concedes that credit information is exchanged with other recognized credit organizations with proper regard for the applicants' privacy. His department is mainly concerned with comm ercial and short term loans. Murphy pointed out that Ms. R yden also serves as collections officer for the bank, acting to redeem bond coupons and process other items for customers, including foreign currency. She also maintains liaison with brokerage firms so that she can buy and sell government securities and stocks for custom ers. She is also involved with preparation of internal financial reports. Murphy's banking background goes back to a 13'/j year stint with the Federal Reserve Bank of Chicago including 5 years as a commercial bank examiner and 8'/» years as a bank holding company examiner. He joined the McHenry State Bank in December 1976 as credit review officer and worked into his present position. The Question, To Balance Or Not! I Proof Department: f rom lef t -J iM#' A n^Cessary adjunct to the bookkeeping department is the Proof Departaient supervised by Doris Johntoft 'under the leadership of head bookkeeper Mrs. Cairns. Mrs. J ohbfOfV and three employees: Annuel Hansen, Ruth Leska and Judy- Huff, verify all transactions covering deposits or involving cash that'^w^ild effect the daily balance. Wording with three 775 National Cash Register proof machines, two in the Corey Building and one in the mai^1>ui}ding, these people prove for accuracy every transaction that entiirf the McHenry State Bank. In the process the tickets, checks and othiif.documents are micro-encoded, endorsed with the machine number, Olid date. The coding allows i\E>C0tion of documents and iffuction of a transaction if udy Huff , Ruth L eska, Annette Hansen, and Doris Johnson, supervisor. are also keyed to the tapes produced by the m achines. The m icro-encoding also makes document indentification readable by the computer. T he purpose of the proof is to review each transaction to ensure its accuracy. After the machine processing, during which the items are sorted and batched in units of 250 documents, checks of local origin are dispatched in batches to Inbanco (computer center) at Volo, and other checks go to the appropriate clearing house. Miscellaneous items which can't be handled on the machines are sorted down manually, listed on tapes, and entered in the General Book. The debits and credits must balance at the end of the day in all proof processing. Mrs. Johnson said her group at the Carey Building handles proof of all items for that building and for the red.by an inquiry. The numbers / *• feTO 1-' ' Whispering Point drive-in. The machine at the main office processes documents resulting from their tellers' transactions. Mrs. Johnson and her associates usually encounter no real excitement in their jobs but, she says, thework is interesting and she finds it challenging to reach the balance at the end of each day, which they must do. Sometimes, l ike everyone else, they have a bad day and things just don't check out. But on the really heavy days, everyone seems to be charged with extra energy and balancing out is accomplished easily. Mrs. Johnson's first banking experience included five years in a Louisiana bank. When she moved to the McH enry area she worked for the McHenry State B ank, took timeoff for a family and then returned to the proof department 6 years ago. U.S. Panic Period During 1907 After the panic of 1907, Congress apf^inted the National Monetary Commission to Study and formulate basic banking and currency reforms. How could money panics be avoided? What was needed to strengthen bank reserved? How could the nation's credit machinery and money supply be made more elastic? What was required to improve the routing of checks among banks so that payments could be cleared faster? In December 1913, P resident Wilson signed the Federal Reserve Act, which had been enacted by Congress after exhaustive study and debate. This statute, with many later amendments, provides the*;abroad national framework within which our commercial banking system operates today. The changes it brought about can best be understood by briefly reviewing the organization and purposes of the Federal Reserve Sy st em. Need for a Central Bank As has been mentioned earlier, the chief deficiency of the American banking system before 1913 was the lock of a central bank. "Central bank" is a technical term for a national institution which is charged by law with the responsibility for supervising ordinary banks and for controlling the volume of bank credit and the nation's money supply. Central banks are primarily bankers' banks, in the sense that their main dealings are with banks and with the national Government, rather than with the general public. Structure of the F ederal R eserve System Most foreign countries have one central bank. Usually the central bank is owned and operated by the government. Our central banking system is unique in a number of respects. Fearful of too much centralization, the Congress established not one central bank but a central banking system consisting of a Board of Governors and 12 district Federal R eserve B anks in various parts of the country. The capital stock of each Federal Reserve Bank is owned by the "member" banks in its district. Dividends on the stock are lim ited to a maximum of six percent. T he F ederal Reserve Banks operate generally under the guidance of the Board of Governors of the Federal Reserve System in Washington. The Board appoints three of the nine directors of each Federal Reserve Bank; the other directors are elected by member banks in the district. The Federal Reserve Banks are operated strictly in the public interest, rather than to make profits. Since 1947, about 90 percent of their earnings, over and above expenses and dividends, have been turned over to the United States T reasury. M em bers of the B oard of Governors ewe appointed by the President of the United States, subject to confirmation by the Senate. The members are appointed for 14-year terms, which are so arranged that the term of one member expires every two years. The Board enjoys a degree of independence within the U.S. governmental framework. In sum, our Federal R eserve System represents an ingenious compromise designed to avoid domination of the monetary system by either political authorities or private financial interests. The Congress could have required all banks to become members of the System. It did make membership compulsory for national banks. For state-chartered banks, however, membership is optional. M onetar y M anagem ent by the F ederal R eserve A vital task of the F ederal R eserve is to assure that the economy has enough bank credit and money at a particular time. Equally important, the System is charged by law with responsibility for regulating bank credit and the money supply so as to prevent or minimize inflationary or deflationary developments. When commercial banks expand their credit (loans and investments), the money supply is increased; when bank credit contracts, the money supply is reduced. Therefore, it is important to have some central regulatory machinery which can control the volume of bank credit in the best interests of the country. Monetary control works primdHf^? through bank reserves. The System can add to the available supply of bank reserves, thus making it possible for banks to expand credit; or it can reduce the supply of bank reserves in order to check credjt expansion. The principal means Of" doing this is purchases and sales Government securities in the opj market. Another tool is changes in t| rediscount rate, i.e., the rate char^ by a Federal Reserve Bank to _ mem ber bank wishing to borrow from it. Finally, the Board of Governor^ can raise or lower member bank reserve requirements within certair) l imits. T his latter power was given to the Board of Governors in the 19X's. Prior to the establishments of tf)je^ Federal R eserve Systefti, as we hevf , seen, there was no central organization for formulation and implementing a national monetary and credit policy. The nation now has tools at its disposal not only for alleviating temporary credit stringencies and monetary disturbances, but for regulating th^ flow of bank credit in such a way as^o foster economic growth and smooth out cyclical fluctuations. T hese monetary tools are among the ffcygt* important economic controls possessed by modern societies'. Whether our economy performs weH or badly - indeed, thevery survival pf our private enterprise system depends in no small degree on iiow capably these tools are used. - ' . . . ' . . - . . A HOO c (i 'ogA, o: p r tor rt • rtnoo! i * qtts* C 2 ( 1 ; I T he Whisper ing P oint dr ive in fad l i ty on Cry stal L akeR oad. | i>. Officer t ra in*. L orry Kolman and K.Id. I mthfs 11,1m to on .>planaflon by execut ive v ice president Ormel Prust . New Members In Training Two of the newer members of McHenry State B ank are L awrence J. Kolman and Keith Leathers shown with E xecutive Vice P resident, Ormel J. P rust. ' Larry Kolman lives in Harvard with his wife and two children. He has a B.S. degree from Lewis University and has had approximately ten years of previous banking experience. Keith Leathers lives with his wife in Ingleside. Keith is a graduate of Eureka College and he previously taught school and coached at the Junior High School level in central Il l inois where he was born and raised. Both of these young men will be receiving permanent assignments upon the completion of their training. "1 ALTHOFF INDUSTRIES Althoff Industries is proud to have had a part in the construction of a building which symbolizes progress in our community. We congratulate the McHenry State Bank and their depositors on this significant event and thank them for the opportunity to contribute to the architectural beauty of the city of McHenry. ALTHOFF INDUSTRIES PLUMBING-HEATING-ELECTRICAL CONTRACTORS 809 N. Front St. McHenry, Illinois 385-5700 *< • • "*'>