YOUR MONEY’S NO GOOD AT LONE STAR BANK

A bank without a vault? A pecuniary institution without cash? Millions of dollars in assets without so much as a single security guard? Sound a little crazy? It did to Joseph B. Stedman, the board chairman and CEO of Texas Commerce Bank-Casa Linda, and a couple of his banking associates when they began tossing around ways to minimize security problems last year. The idea also sounded a bit strange to federal banking regulators when Stedman and 19 other investors asked for a charter to open Lone Star National Bank. Because they planned to open their bank in a trailer, the group of investors tacked on another unusual request-that they be permitted neither to accept nor give out cash.

“At first, all they [federal regulators] said was that they had never had such a request,” says Stedman. “After they checked it out, they couldn’t find any reason not to grant us permission to operate. They said it was permissible.”

So in August of 1984, the new bank opened in a small trailer outside Akard Place, a four-story office building located at Akard and Cedar Springs just north of downtown. Although they had the option to use currency, the lack of cash proved cost-effective and eased security worries. So the bankers continued to operate without greenbacks when they moved into their permanent offices in Akard Place last January. Lone Star remains the only “cashless” bank in the country.

Stedman says the cashless concept has worked so well because it allows a significant reduction in operating expenses. Lone Star needs no security guard, burglar alarm, armored car or large vault. The bank employs about half the number of clerical employees used by a typical bank its size, and its insurance premiums are lower because there is no cash in the vault. Stedman also says the audit function is less expensive because it is far simpler. Another advantage: The bank doesn’t have to worry about hot check writers or narcotics traffickers using the bank to launder their dirty money.

“I recently compared our operating expenses to those of the Casa Linda bank in 1979, which at the time had about the same assets,” says Stedman. “Lone Star’s expenses ran about $1.1 million for the first year, as compared to $1.4 million at the other bank. Because of that, we’re able to pay higher rates of interest to our customers.”

Nearly 700 of Lone Star’s 917 accounts are individual interest-bearing checking accounts. “They’re mostly Yuppies; af-fluent, educated, sophisticated types who are willing to try new things,” says Stedman. “This is not an attractive bank for people who use a lot of cash. You’ve probably noticed that there’s not a customer in this bank right now. But when we open up each morning there’s sure a bunch of mail.”

Though Lone Star does all its business by mail or through checks, it is a full-service bank. Like any bank, Lone Star makes loans and offers money market checking accounts, certificates of deposit and even issues MPACT cards. The major dif-ference, says Stedman, is that money market customers are of-fered from one-fourth to three-quarters of one percent higher interest rates than other major Dallas banks. That enticement alone has lured customers in higher income brackets to the bank, says Stedman. “I think we’ll see other cashless banks popping up in the future,” Sted-man says. “After all, civilization started out trading in rocks, chicken and wheat before it ever heard of currency. Now we’re trading in electronics. In fact, I think in 20 years or so, banks that deal in cash will be the unusual institutions.”