United Missouri Bancshares Inc. was so fed up with protests about its Community Reinvestment Act record, the $7 billion-asset company spent a whopping $250,000 on a loan tracking and mapping system to prove its critics wrong.
The system, developed with several software companies, is one of the most elaborate and expensive in an industry that has been forced to plot loans on maps by regulators looking for evidence of redlining.
United, which is based in Kansas City, Mo., can show how 27 categories of loans are distributed among borrowers in most of its major market area down to one-sixteenth of a mile. What makes this impressive is that United has 14 banks in Missouri and seven in Kansas.
In the near future, the system-will also be capable of mapping the distribution of deposits.
Criticism of Cost
Other bankers said that in their view, United has overpaid for its home-made system because similar mapping and data-crunching packages are available for far less from vendors.
"When they see ours, they'll see nothing else comes near it," said Chuck Lewis, the man in charge of compliance at the banking company.
"We looked at a lot of products, including some good ones and some that did about what a third grader could do," said Mr. Lewis. "Our system blows up Kansas City block by block, and I'll get you within four feet of where we've made a loan."
Not only that, but Mr. Lewis can generate the information on a personal computer in minutes.
The Kansas City map alone cost $70,000. It was developed with Formation Technologies, a specialist in 911 systems.
40 Fields for Each Category
The program provides 40 fields for each category of loan. For instance, the company can look at mortgage loans at its banks that were made or denied by specific loan officer, loans denied for a specific reason, and loans approved or denied for residents of a specific census track or ZIP code.
The tool gives management the capability of learning in minutes whether it is serving its community, as is required by the Community Reinvestment Act.
"We never want a CRA problem simply because we don't have the right data for examiners," said Mr. Lewis, who describes United Missouri as a conservative lender with a loan to deposit ratio of about 40%.
United Missouri knows all about CRA protests. Attacks by community groups in 1992 put all seven of their Kansas bank acquisitions on hold.
Acorn Target
United Missouri, which got a "satisfactory" CRA rating that year, was targeted by critics like Acorn because it chose to go toe to toe with them rather than cave-in to their demands for special programs.
The run-ins have been frequent and, from time to time, heated. Acorn's chapter in St. Louis has been urging labor unions to withdraw their deposits from a United Missouri branch there because it claims loan data showed that the bank in 1990 had just one mortgage outstanding in the city.
The Association of Community Organizations for Reform Now wants the bank to hold mortgages to low-income people in portfolio so it can offer them more flexible terms than it could for loans sold into the secondary markets. Acorn has also offered to screen and coach low-income applicants for $15,000 per year.
"They're the hardest bank we ever negotiated with," said Mary Johnson, Acorn's director of bank organizers in St. Louis.
Up until the arrival of the tracking system, United Missouri's compliance people charted loans by sticking color-coated pins on wall maps.
"The people at Wal-Mart were mighty happy with all the boxes of pins they were selling us," quipped Mr. Lewis.
Chris Spellman, Mr. Lewis' assistant, spent three years full time helping develop the maps and imputing loan data.
|Famine to Feast'
The new system has given United Missouri so much data, "We've gone from famine to feast," said Mr. Lewis.
Mr. Lewis said the system enabled the bank to prove to citizens groups in a matter of minutes that they were meeting the needs of the marketplace, and it also helped keep them ahead of the CRA curve by uncovering gaps in their CRA coverage.
"We started look at trends and noticed pockets of things. For example, our car loans were down in a low-income area," said Mr. Lewis.
A visit to the neighborhood revealed that a plethora of "no-money-down" store-front lenders had opened shop.
"Our solution was to advertise more to tell people that if they were willing to put 20% down, we would give them a much better loan rate than the competition," he said.
The system also uncovered mistaken conclusions drawn from data collected by regulators.
The government showed a 70% denial rate for minorities. But with the new system, the bank looked at the 897 loans it had booked and saw that over 50% had been made to minorities.
If all this sounds like the making of a great marketing tool, it is.
The bank will be able to plot the location of its jumbo CD depositors or customers who financed luxury-car purchases and zero in to cross market other products. And if will offer the system to correspond banks -- at a lower price than the development cost.
"We're just beginning to realize the potential," said Mr. Lewis.
Chuck Lewis
Age: 38 Education: BS, Business, Central Missouri State University Title: Vice president and compliance officer Company: United Missouri Bancshares, Kansas City, Mo. Job history: Mr. Lewis has spent the last 17 years with United Missouri. During that time, the compliance department has grown from a one-man operation to a staff of seven Memorable experience: Watching the PC environment becoming dominant in all area of banking Family: He is divorced and has three children Hobbies: Enjoys sports
