A Publication of WTVP

Douglas S. Stewart, president of First of America Bank, has been associated with First of America and its predecessor, Commercial National Bank, for 24 years. In fact, banking has been his career interest since high school, when he worked as a teller in Cullom, Illinois.

Stewart graduated magna cum laude from Illinois Wesleyan University in 1973 with a bachelor’s degree in business administration. He went directly to Commercial National Bank as a management trainee. The next year he became a trust administrator, and after that, manager of the employee benefits department in the trust division.

Meanwhile, Stewart earned his master’s degree in business administration from Bradley University in 1980.

From 1983 to 1990, he was in the trust division at vice president and senior vice president levels. When the bank became First of America in 1990, he was made senior vice president and state manager of the bank’s trust division and agricultural services. He moved to the retail division in 1991 and became president of First of American earlier this year.

Stewart has instructed courses at Bradley University, Illinois Central College, and the ABA National Trust School.

He’s currently chairman of the Illinois Central College board of trustees and the OSF Healthcare System board. Additionally, he’s on the United Way fund drive committee, is on Lakeview Museum’s advisory board and the Country Club of Peoria board, is assistant treasurer of First Baptist Church, and serves on the Peoria Area Chamber of Commerce education committee.

Steward and his wife Vicky have two children: Sarah, 20, and Blake, 16.

How did you become interested in banking as a career?

My formative years were spent in the small farming community of Cullom, Illinois. During high school, I had an opportunity to work as a teller at the local bank where my father was a director, so as I headed off to Illinois Wesleyan University I had a basic knowledge of the banking system.

One of the areas that particularly peaked my interest at Wesleyan was financial markets. I wanted to find a job where I could learn more about the markets and work directly with customers. Therefore, banking seemed a direction I should explore.

Interestingly, I only interviewed with one bank – Commercial National Bank of Peoria. Their management training program appealed to me. Most importantly, I was attracted to the people and the bank’s position in the community. I felt the bank provided an atmosphere in which I could excel personally, and Peoria was a community in which I could become involved. I was attracted to the city as a place where I thought I would enjoy living and raising a family. Twenty-four years later, I’m still in Peoria, still at 301 SW Adams, and still on the fourth floor of the bank building.

The corner of Liberty and Adams has been a banking mainstay for generations. Please refresh our memory on the history of banking at that location.

The current bank building at Adams and Liberty was constructed and first occupied in 1925 and 1926, respectively. However, the history of First of America Bank in Peoria predates this building. Commercial National Bank was chartered in 1885. To put things in perspective…in 1885 there were only 38 states in the Union, William Burroughs invented the adding machine, and Peoria was converting from mule-drawn to electric streetcars. Since 1885, the bank has been known as Commercial German National Bank, Commercial Merchants National Bank and Trust Company, Commercial National Bank of Peoria and First of America Bank-Illinois. We also tend to think of mergers as a fairly recent phenomenon in the financial services industry. Our current bank is the product of no les than 20 mergers dating back to at least 1904.

We are proud of not only our building but our reputation in this community. We feel we have been the focal point of banking in this community for the past 110 years, and intend to maintain that position in the future.

You’ve been part of many changes since beginning your career. Which changes in the banking industry do you think were the most traumatic and which ones were the most beneficial from a consumer standpoint?

The answer to both of these questions is the same: deregulation. Perhaps a trip down memory lave will explain my response. I started my banking career 24 years ago in 1973. At that time banking was a highly regulated industry. Regulations limited what we could pay on deposits and usury laws limited interest rates on loans. The breadth of products available to consumers was very limited. The financial service industry was very segmented. If you needed insurance you went to an insurance agency. If you wanted to buy or sell a stock you went to a brokerage house. If you wanted to borrow money for a home you typically went to a savings and loan. If you belonged to a credit union it was probably affiliated with your place of employment and limited to employees and their families. In fact, Illinois was a unit banking state and did not allow branches. Further, there was no such thing as an ATM or PC banking and money market mutual funds did no exist.

Deregulations in one form or another (and it continues as we speak) has significantly diminished the segmentation and increased competition. Heightened competition has been very positive for the consumer in terms of convenience, breadth of product line, rates available on deposits and loans, and the availability of new services. All of these enhancements also brought about many changes in local financial institutions. Some of these institutions did not survive (primarily savings and loans) and interstate banking produced mergers and in some instances downsizing. Generally speaking, people have a difficult time adjusting to change. Change in this industry is inevitable and at times it is unsettling, even traumatic. As I look back on the past 24 years, on balance I would say the positives substantially outweigh the negatives.

Since we’re talking about changes in the industry, can you give us your thoughts on changes and trends now taking shape? What can this community look forward to in terms of the dynamics of the industry in the future?

As with other industries, consolidation will continue to occur. Recent legislative initiatives at the federal level would create an atmosphere for mergers to occur even across industry lines. So while banks will continue to merge with other banks, we may also see more mergers of banks and brokerage firms and insurance companies. State Farm received a charter to form a bank last month. In the not too distant future these reconstituted financial service providers may well begin to take equity positions in other companies. In fact, the ownership positions may well be in industries unrelated to finance, and simply represent a portfolio of investments.

Since numerous regional banks and national brokerage firms are located here, the aforementioned merger activity will be a part of the Peoria landscape. I also foresee banks not only selling insurance products but merging with or purchasing some of the local independent insurance agencies. However, through all of this I expect the smaller, local banks, particularly in rural communities, will survive and continue to serve their customers well. So we will see a number of very large banks and many small banks – the mid-sized banks are likely to be absorbed.

From an outsider’s standpoint, there seems to be spirited competition among the area’s financial institutions. How would you characterize the state of play now – with the field occupied by credit unions, banks, investment organizations, etc.?

I would characterize the state of play as definitely spirited and the playing field as generally level…with one exception: credit unions. As we previously discussed, insurance companies are chartering banks, brokerage firms are merging with banks, etc. However, credit unions have an advantage that needs to be addressed – they do not pay income taxes and we as United States citizens are subsidizing that portion of the financial services industry to the tune of nearly one billion dollars a year.

Credit unions were created for good and important reasons in 1934: to provide funds to people of “small means.” Because of that special purpose certain conditions and incentives were established: credit union members were to have a common bond to promote saving and lending with one another, and credit unions were to be exempt from federal income tax. Ironically, they are also exempt from rules requiring other federally-insured financial institutions to serve low income people, because arguably credit unions were formed to help those very groups.

Perhaps a New York Times editorial dated March 8, 1997, states the case most succinctly. “…many credit unions have expanded well beyond the 1930’s notion of a ‘common bond.’ Some include more than 100,000 members and control billions of dollars in assets. They offer a full range of financial products, including mortgage loans, insurance and savings accounts. Their members earn above-average incomes. These large credit unions are just like banks. Competition, not a tax break, ought to decide where Americans want to bank.”

What do you believe the consumer is looking for in terms of banking or financial services?

Most of our studies indicate that the consumer is looking for convenience first, coupled with good service and competitive rates. I doubt that my answer surprises many people; however, the issue if one of defining convenience. Historically, convenience has meant the location of your branch network and its hours. More recently the definition is expanding. Some define convenience as whether or not you provide PC based banking. Other define convenience as ATM locations and 24-hour-a-day telephone service. In general, the younger our customers are, the less we see them in our branches and the more we hear from them via the telephone or electronic transmission.

A good deal has been said about the strengths of hometown banks versus out-of-state holding companies. There appear to be plusses and minuses on both counts. How does First of America view this dimension of the current banking scene?

You are right, a good deal has been said about hometown banks versus out-of-state holding companies, perhaps more in ad campaigns than anywhere else. In the final analysis, the customer will decide where he or she is best served and utilize that institution regardless of the home office location.

First of America has succeeded, historically, by viewing itself as a collection of community banks. While our corporate structure has changed, out greatest strength remains: we serve customers locally in a timely efficient manner with top-notch people. In addition, our size allows us to bring more services to the community – electronic banking, international expertise for small and large business, for example. These services would be less available if we were a much smaller bank.

For our business customers, we also access the capital markets through bond issues because of our underwriting and investment banking capabilities. We could not have offered these kinds of services if we were still operating as Commercial National Bank.

One last point: our home office may be located in Michigan, but I suspect there are far more shareholders of First of America in the Peoria area than any other financial institution.

Traditionally, banks have been an important part of Peoria’s growth and progress. Leaders of your industry have helped shape this very community through their volunteer interests and professional dedication. Your background and interests continue that tradition. How important is this from a community and career standpoint?

Peoria is a wonderful community. It is a great place to do business and raise a family. That did not just happen. We have been fortunate over the years to have business leaders who have dedicated their time and their financial resources to move Peoria to where it is today. As I look at the people whom I have succeeded such as David Connor, Warren Webber, Bob Stevenson and Skip Snyder, I feel a strong personal commitment to uphold that tradition, to improve our community. Obviously, if the Peoria area continues to prosper, our bank will continue to grow and get its fair share of new opportunities

The local economy has gone through many changes as businesses have restructured to be more competitive. How do you track what’s happening locally from an economic perspective and translate that into First of America business strategies?

One are that we have not discusses in any detail is the business banking product line. Historically this bank has been predominant in the Peoria market in commercial banking. Therefore, the best barometer that we have is our local customers. We talk with them regularly; we see their financial results throughout the year and we know which businesses are key indicators of the current and future health of our local economy. Also, our local board of directors has been an invaluable sounding board as it related to the economic outlook for central Illinois.

It’s no secret that things are currently very strong. Employment levels are high, production is near capacity in the manufacturing sector and the agricultural economy remains strong. Thanks to a good balance between foreign and domestic sales, as well as a good balance between the services economy and the manufacturing base, I am very optimistic about the Peoria economy for the foreseeable future.

The community is in a period of great renovation with riverfront development, improvements in educational infrastructure with Illinois Central College’s downtown presence and Bradley University’s centennial campaign, major capital campaigns by many human service agencies, and annual fund-raising campaigns, such as United Way. Do you believe we’re bit off more than we can chew – or are contributors still out there who can make these efforts successful? Has First of America’s “share” of these local campaigns changes with the shifting of headquarters out of Peoria?

First of America has contributed generously to each of the efforts you mention and to many others. In fact, many, many local drives have been successful because First of America presidents, employees and directors led them, often even initiated them.

We have had some recent tightening in all of our budgets, as many other local companies have experienced during periods of change in their respective industries. We are being more selective; we are adjusting to revised corporate policies, and frankly, less money right now. But we make decisions in Peoria and I am pleased with the support from our company. Bank philosophies differ, but First of America is founded on a fundamental community based principle: while our structure is changing, our community commitment is not.

You have had a wide range of community involvement. What have been some of your more rewarding volunteer commitments?

I particularly enjoy, and hopefully bring some expertise to, the Illinois Central College board of trustees and OSF Healthcare System general board.

I have been a trustee at Illinois Central College for the past ten years. Community colleges are unique institutions and have the capability of meeting so many different educational needs. The long term economic future of the area depends upon a well-educated and highly skilled workforce. Illinois Central College will be a major player in the education initiatives necessary to provide the skills for our work force of the future.

OSF Healthcare System is not just a major local employer but a major employer statewide. I have had the privilege of serving as chairman of the general board for the past five years.

Two things intrigue me about this organization. First, the health care industry is changing at warp speed in much the same manner as the financial services industry. This company is not only coping with change, but is striving to find advantage in the situation. More importantly, this organization is absolutely focused on its mission and values. It is refreshing to see long term business decisions being made in the content of the company mission and beliefs, even though other strategies might provide greater short term economic benefits or mollify certain constituencies within the medical community.

You’ve had the opportunity to experience many leadership styles. How would you characterize your approach to management?

The two individuals who preceded me as president of this bank, David Connor and Bob Stevenson, had very different leadership styles. Both men were successful professionally and remain leaders in the community. I count on them for advice and consider them good friends.

Leadership starts will hiring good, talented and committed employees. I absolutely believe our people are the strength of this bank. I believe a good leader sets the tone and clearly communicates the expectations. Further, it is important through employee participation to have the team “buy in” to the goals.

Finally, we must measure our results, celebrate our victories and learn how we can do better where we are deficient. Today’s corporate environment demands teamwork, participation and focus. I believe we have all three at our bank.

Do you believe the community is focusing on the right priorities? What friendly advice would you have for the newly elected city leaders on this subject?

The community is focused on a number of right priorities. It is heartening to see so many positive efforts underway. For example, the dynamic renewal of the riverfront is well underway, as this has been a community goal long before I even joined the bank.

At the same time, the city council is aggressively striving to strengthen our older neighborhoods. For example, the transitional neighborhood program holds great promise, with leadership provided by the United Way, Children’s Home, City of Peoria, neighborhood residents and churches. Bank employees are involved and we look forward to making this process work.

It is also exciting to see the community so focused on our schools. The city council recognizes the importance of District 150 to our future. While there is a great debate over how to support education, the significant fact to me is that everyone seems to be asking how to be a part of the solution. I applaud our leaders for that.

As far as friendly advice is concerned, I would urge elected officials to create a process for regular meetings in order to discuss community priorities with each other. A healthy neighborhood, for example, needs good streets, crime prevention, code enforcement and so forth; but it also needs a good school, good park and recreation. It seems to me that a coordinated strategy would help everyone reach the goal: strong neighborhoods.

It would be very helpful if each of the units of government understood the goals, problems and concerns of the others. Just becoming well acquainted on a personal basis is worthwhile. Good things happen when people communicate.

Do you think business is doing an effective job of interacting with the local public sector? What could individual businesses or business associations do to improve development and implementation of coherent economic growth strategies?

Yes, I think the business community is continuing to make great strides in working with the public sector. Again, one reason for the riverfront progress is the commitment of Caterpillar, Inc., and people like Jim Baldwin. The Greater Peoria Airport Authority has defined public-private cooperation with its extraordinary effort to induce DHL, the worldwide air cargo company, to relocate its hub here from Cincinnati. Win, lose or draw – I have never been more impressed with our community’s full court press. The Economic Development Council has been very active in promoting business retention, and in transportation issues — I-155, the Peoria-to-Chicago highway, and others.

Our convention and visitors bureau continues to succeed in bringing business to the area; their work with the city and others in landing the state high school basketball tournament speaks for itself.

Behind each of these successes and others has been commitment and dedication from a business or business leader, either serving as an elected official or volunteering energy to make a project happen. I think this should be a lesson to us, or actually remind us of a lesson that we must not forget: Peoria is a special place because Peoria area business leaders care and get involved. This tradition makes us unique.

By the way, it also suggests that we should encourage more business people to serve on elected boards – especially District 150 and other school boards since education is such a vital priority today.

If you could change anything about Peoria, what would it be?

Peoria needs to continue to emphasize the positive features we enjoy here. How often it is that families transfer to Peoria and then never want to leave. Outsiders expect a cornfield, but discover the Illinois River, the bluff, good schools, Bradley, the arts, the civic center and a quality of life they never want to leave. It seems that sometimes we put too much focus on our problems and forget the bigger picture. Peoria is an outstanding place to work and raise a family. We ought to let the rest of the world know about it. IBI