Chicago Tribune from Chicago, Illinois • 102

I 2 Section 7 Chicago Tribune, Sunday, August 16, 1987 Mid-Citco in Oklahoma deal action. -r Robert Y. Empie, who resigned June 30 as Oklahoma's banking commissioner, is to be named president of Union Bank. In March, Empie, a veteran Oklahoma banker, was ousted as banking commissioner by Oklahoma Gov. Henry Bellmon.

Bellmon accused Empie of trading on inside information about another Oklahoma bank. In April, Bellmon reinstated Empie and withdrew the charges, but Empie agreed to resign June 30, instead of 1990 when his term was to expire. Skopec said he believes the Oklahoma economy, long troubled by the decline in oil prices, may have bottomed out. He said Mid-Citco, with assets of $600 million, plans to build Union Bank as a center for retail banking, middle-market business lending and even judicious -energy lending. Robert Harris, executive vice president of the Oklahoma Bankers Association, said he welcomed Mid-Citco's proposed entry into his state.

"We are in need of capital," he 'said. Since January, 1986, 37 banks have failed in Oklahoma. porters. Sources said he got his start with Arlen Realty Development a New York real estate company that was swamped with debt in the late 1970s. Admirers say he is quick with numbers.

"He can size up a deal very quickly and understand it," said a Chicago mortgage banker. At the same time, he's not a diplomat or a politician. He's a very aggressive New Yorker," the source said. That soon became apparent in his dealings in Chicago. After buying Ben Franklin and Palatine in 1983, he rapidly began booking high-yield commercial real estate loans.

Ben Franklin's commerical loans had risen to 51 percent of its total loans at year-end 1984 from 10 percent two years earlier, according to Sheshunoff a financial-institutions data service. Regulators at the Chicago home loan bank and at the Bank Board in Washington soon stepped in to curb Daly's more aggressive practices, sources said. And they began keeping a close watch on Daly. When he bought Uptown in mid'1984 for $5 million in cash, he chose individuals with impeccable credentials to join him on the board, including Burke, president of the Bank Administration Institute, Northwestern University finance Professor Stuart Green-baum and Robert Wilson, retired chairman of the former Percy Wilson Mortgage Co. The three previously had been picked by the regulators themselves to serve on the board of First Federal Savings and Loan Association (now Citicorp Savings of Illinois).

The board's chairman has been Gerald Mullin, a partner with the law firm of Epton, Mullin Druth Ltd. Even so, a senior regulator with the home loan bank attended several early Uptown board meetings, one source said. It appears that the Uptown board was more independent than those at the other Daly-owned thrifts. For that reason or because of pressure from regulators, the thrift avoided the kinds of commercial lending that hurt Ben Franklin and Palatine. (Last year a fourth Daly institution, Niles Federal Savings and Loan Association, was merged into Uptown.) But "no matter what people tell you, Daly calls the signals," asserted one knowledgeable source.

"When Tom's involved, he runs everything." Uptown benefitted from permissible accounting techniques that allowed it to write its portfolio of long-term, below-market-rate mor-tages to their current value and record the difference as goodwill, an 'intangible asset that could be amortized over 23 years. At the end of 1986, Uptown had net worth (assets minus liabilities) of $107.2 million, or 9.8 percent of assets, but its tangible net. worth was negative because it had goodwill of $136 million. When rates subsequently fell, Uptown was able to record a profit for accounting purposes when it sold the mortages and built up tax loss carryforwards. But its main coup involved a bet 1 that interest rates would drop, thus raising the value of the high-yielding mortgages it began acquiring in 1984.

For example, in 1985 Uptown bought a $400 million portfolio of residential mortgages from Crocker National Bank in San Francisco; it subsequently pooled and resold some of the mortgages on the secondary market where mortgage-backed securities are traded. Such profits made Uptown the top-ranking in the state in the last two years in return on assets, according to the trade publication National Thrift News. Late last year Uptown decided interest rates might rise and began building up its adjustable-rate mortgages, sources said. Regulators objected to Daly's plan to make a public stock offering for Uptown before he merged it with the troubled Ben Franklin and Palatine, sources' said. As part of the merger, Uptown created a $34 million loan loss reserve, greater than the two thrifts' net worth of about $25 million.

Although authorities urged the unusual voting trusteeship arrangement, they were surprised that Daly chose the high-profile Isaac. Isaac declined to comment on his role, which mainly involved selecting directors. Daly resigned from the board and Isaac added three new members. But Daly was clearly looking for a way out. A lawyer who represented both Daly and First Nationwide brought' them together several months ago, according to Frank.

First Nationwide won the right to expand into Illinois by buying a failing St. Louis late last year. (Unlike its other acquisitions, the Uptown purchase didn't involve aid from the Federal Savings and Loan Insurance Corp.) The $15.1 billion thrift, the nation's sixth largest, will change Uptown's name to First Nationwide and replace its management, which saw considerable turnover under Daly's reign. Uptown's 24 branches will make First Nationwide a substantial competitor in the Chicago market. First Nationwide, which concentrates on consumer lending, has plans to set up 150 new branches in mart stores this year.

Continued from page 1 commercial loans that have "an entrepreneurial thrust," Frank -said. Some of them involved so-called kickers, or participation in future profits. Most of the troubled loans came from Ben Franklin Savings and "Loan Association Oak Brook -and Palatine Savings and Loan Association, two Daly-owned thrifts 'merged into Uptown earlier this year, apparently under pressure 'from regulators. Their combined $75 million in loans, including "some in Florida and New York, represented 12 percent of their folio commercial loans totaled $225 million, i- The sale of Uptown has revived that some of the questionable loans may have involved deals in which Daly or his associates "had an interest. There is also 'speculation that regulators disputed appraisals used to justify However, authorities have taken public action against Daly or institutions.

Neither Daly nor his attorneys at the Chicago law firm of Jenner Block returned phone calls. "The regulators deserve a good xleal of credit for bringing about a in ownership that's good -for the public interest and good customers," said Ronald Burke, a former Uptown director who resigned late last year. Leo Blaber, president of the Federal Home Loan Bank of Chicago, nwouldn't comment on whether was forced out. Blaber con--firmed that he suggested" the Tidea of a voting trust for Daly's Uptown stock, but wouldn't say why. Daly "wasn't a typical conservative savings and loan operator, if there is such a thing," Blaber said.

-He added: "Sometimes real estate developers have a hard time becoming accustomed to a regulated Indeed, some sources close to the Uptown situation regard it as an example of the problems that 'arise when developers become Savings and loan managers. "The industry is full of situations where mixing real estate developers with the lending' side of the business doesn't work," said one banking source. From the start, Daly, 42, didn't if off with regulators. "He's extremely bright, a very quick talker, dealmaker, said an associate. a little too smooth for Jhem." Daly, who jives in Westchester N.Y rarely talks to re By Bill Barnhart Mid-Citco holding company for Mid-City National Bank of Chicago and two suburban banks, has agreed to buy a troubled bank in Oklahoma City and install the state's former banking commissioner to run it.

The purchase of Union Bank and Trust Oklahoma City's fifth-largest bank with $200 million in assets, would be the first time an Illinois bank-holding company has bought a bank outside the Midwest. Also, it would be the first Oklahoma bank that was not failing to be sold to an out-of-state bank-holding company. Kenneth A. Skopec, Mid-Citco president, said Mid-Citco is offering to buy all the stock of the bank for $100,000. In addition, the Chicago banking firm proposes to pump $8 million of fresh capital into the Oklahoma bank.

Skopec said he approached the Federal Deposit Insurance Corp. last spring about buying troubled banks outside Illinois because "it became apparent that acquisitions within the state were becoming exorbitantly and brutally priced. Last year, Oklahoma enacted a Stocks Continued from page 1 are several reasons for the lack of gusto shown by the smaller stocks. "This market isn't being driven by valuations and earnings but by liquidity," said Stephen Timbers, executive vice president and chief in-vestment officer for Kemper Financial Services Inc. in Chicago.

Much of that liquidity at the margin comes from foreign investors who know and recognize on-lythe big household names, a relatively narrow segment of the market. So that's what they buy. And because institutional invest tors "play the momentum game," said Athey, "they naturally like to buy stocks that are going up and sell stocks that are going down." So investors "go with the flow and it feeds on itself." Timbers added: "Most mutual funds go where, the action is." The action right now is in the big capitalization stocks. Many of those big household name companies are the ones that have restructured themselves to become more competitive. "They are seeing the fruits of that recovery," said Athey.

"As their sales rise, they get a regional interstate banking law permitting acquisitions of Oklahoma banks that were in trouble, but not failing. The scope of the law became nationwide on July 1. Skopec said Mid-Citco has several longstanding business relationships in the Oklahoma City and Dallas area. Moreover, E.M. Bakwin, Mid-Citco's chairman, has a long, family association with the stockyards business and is chairman of the Oklahoma City Stockyards Association.

Kenneth K. Mcllhaney, president of Union, said his bank approached Bakwin after learning of his interest. 'This summer, the FDIC directed Union Bank to charge off nearly $5 million of bad loans. That action reduced the bank's primary capital to just 2.55 percent of assets, well below regulatory requirements. In addition to its $8 million in capital for Union Bank, Mid-Citco has applied to the FDIC for an additional capital infusion.

Skopec said the deal contemplates a total of $45 million to $50 million in capital assistance for Union Bank. An FDIC spokesman declined to comment on the prospects for getting FDIC assistance in the trans Stephen Timbers leveraged benefit because their costs are lower. The profits of industrial America are rising at a. more rapid rate than the smaller growth companies." But right now, said Oberweis, president and chief executive of Oberweis Securities Inc. in Aurora, "the value is in the smaller companies.

There is relative overvaluation in the larger companies." He added: "Usually you think of the big companies as being safer than small companies. i'. STAFF ATTORNEY We are a Fortune 200 comDanv in for our Law Department The candidates to be considered will have 3-5 the Midwest seeking an attorney contracts and A law. A atrona drafting, negotiating, interpersonal years' experience in general business, academic record together with excellent and communication skills are essential. Some media experience would be helpful.

The position offer broad professional challenges and responsibilities. For confidential consideration, please send your resume, including education and comp CD But in today's market, the opposite is true. We are advising clients it is absolutely time to Took at small stocks now." "Those big companies are having their day in the sun," said Athey. "But we haven't had a bull market in the last 30 years when secondaries didn't also get their day in the sun;" When it comes, the experts agree, it probably will be at the end of the bull market. That could be tomorrow or in six months.

And when and if the small stock frenzy comes, it doesn't mean the bull market will collapse overnight, said Monte Gordon, vice president and director of research for Dreyfus Corp. "These stocks are the playground of the individual and when they start buying in, you will see very heavy volume 250 million to 350 million shares a day consistently. But it isn't like on Monday they start buying and on Wednesday the market collapses. It takes months." "To be brutally honest," said Athey, "there is no sign today that smaller stocks will do better. But if this market is like others in the past and if small stocks are going to get their day, that implies there are at least several months to go." "Jlii.i Ui SEAT TODAY.

i lete salary nisiory, 10: a. P.O. Box 803883, TLK 034 Chicago, IL 60611' qml opportunity tmpleytr ml 7i fc QMalley A wiin eye-popping grapntcs. incoiporated (In-k6r'p9-ra'tid) adj. 1.

Merged or combined together into a united whole. Attend a free apple desktop publishing presentation at computerland and improve your appearance. Come to ComputerLand's free Apple Desktop Publishing presentation and put in-house publishing to work for you. We'll show you how to professionally print your own presentations, reports, newsletters, correspondence and more. Save on outside printing costs with desktop publishing.

Desktop Publishing gives you professional-quality, in-house results, while saving you thousands in professional-quality outside costs. We're the Chicago area's leading supplier of small computers and business computer solutions. So nobody knows more about it than we do. The macintosh and LASERWRITER PRINTER FROM APPLE. POWER TO SPARE The core of our latest system is an Apple Macintosh.

A full megabyte of memory and 800-kilobyte disk drive offer more memory and storage than ever. The high resolution, bit-mapped monitor is ideal for presentation graphics. And its built-in networking capabilities can link all your departmental resources. Add on an Apple LaserWriter printer and you'll create newsletters, reports and proposals, fiD CALL YOUR Apple, the Apple logo and ARLINGTON or pnnt in dozens of typefaces for more professional correspondence. Plus, it's cost effective as well: a single LaserWriter can connect up to 31 Macintosh computers.

Isobar surge suppressors from trbppijte. the power people. Protect your sensitive electronic equipment with the most advanced surge suppressor on the market You'll get an exclusive filter isolation that eliminates interference problems often caused by different devices plugged into each filter bank. Along with a cascade design that allows you to choose the protection level for your most sensitive equipment When Kathy O'Malley and Hanke Gratteau pool their resources (and their sources) something very special happens: a popular, in-the-know column in the Chicago Tribuna Politicians, movie celebrities, sports personalities: everyone in the public eye (including a few who wish they werent) is likely to show up in brief but bright spotlight. And with so many people worth keeping at least one eye on; kind of reassuring to know that INC.

has a total of four. and they're never closed. In fact INC never takes a vacation! Youll find Kathy O'Malley's and Hanke Gratteau's enlightening team effort Sunday through Friday. Count op it! Every Wednesday is desktop publishing day, 11:00 am 3:00 pm THRU AUGUST. APPLE DEALER LISTED BELOW TO RESERVE YOUR HEIGHTS870-7500 CHICAGO-UNCOLN PARK549-6300 HOMEWOOD798-LAND LAKE COUNTY680-91 1 1 MOUNT PROSPECT640-9494 NILES967-I7I4 OHARE825-6900 Inc.

Macintosh It a trademark of Apple Computer. Inc. A great city deserves a great newspaper. LaserWriter are registered trademarks of Apple Computet.