Along with white pillars out front and classic furniture in the lobby, community banks will soon have another standard feature: personal computers.

The American Banker/Ernst & Young 1993 Community Banking Technology Survey indicates that small banks are purchasing personal computers at almost the same rate as larger banks, indicating that small asset size doesn't necessarily translate into technological timidity.

The survey found that there will be about 103,000 PCs installed in community banks by the end of 1993 and at least 151,000 by 1996.

"There's an increasing trend toward the use of PCs in community banks," said Randall B. Grossman, manager of information technologies at Gemini Consulting Inc., Cambridge, Mass.

"The question for small banks has moved from |Should I use PCs?' to |Why shouldn't I use PCs?'"

Community banks are using PCs for a wide range of applications. And the machines are being used not only by programmers, tellers, and platform personnel. Small banks also are likely to use PCs to run core deposit, loan, and accounting applications.

Clearly, community banks are better suited than large banks to the use of PCs for mission-critical applications at the present time, because the processing volumes of the smaller banks are much lower.

In the case of some banks, a single 486 PC can handle the requirements of an entire institution. Others might require several PCs linked using a local area network. But in both cases, such an arrangement provides a glimpse into the future for all banks, as PCs assume a more important role in banks of all sizes.

"We're using PCs because the technology is moving in that direction and advances in the mainframe have reached a plateau," said Lee R. Gibson, executive vice president at Southside State Bank, Tyler, Tex.

The $377 million-asset bank has departed from the strategy used by most institutions its size and purchased a core banking system that runs on PCs. Southside uses software from Perot Systems Inc. to run a local area network of personal computers, replacing a system that ran on an NCR Corp. midrange computer.

The new system is designed to give customer service representatives a comprehensive picture of customers' banking relationships. Southside will be able to expand its range of retail products, as the current system limits the number and complexity of products - such as certificates of deposit and money market accounts - that it can offer.

Like most community banks responding to the latest American Banker survey, Southside State Bank's PCs use Microsoft Corp.'s venerable DOS operating system. According to the survey, community banks use more than 84,000 DOS-based PCs. Coming in second, with 10,000 units, is Microsoft's Windows operating environment, a graphical user interface which sits on top of DOS.

By 1996, small banks will likely be using 86,400 DOS machines and 50,000 that run Windows.

Still, it's far too early to conclude that PCs have replaced the mainframe at banks. The American Bankers Association's annual survey of banking automation showed that banks with between $300 million and $1 billion in assets still favor mainframe software for their on-line retail applications.

But despite the rising power of the personal computer, about 60% of financial institutions with less than $1 billion of assets still use a mainframe or midrange computer to drive "dumb" terminals at the branch.

One reason for this, Mr. Grossman asserts, is the fact that converting from a host computer to an LAN can be a major headache, causing many smaller banks to steer clear of this strategy.

Another community bank that has made a big move over to PCs is Glenview State Bank, Glenview, Ill. The $500 million-asset institution has expanded the network of PCs used-by its platform personnel from 10 to 150 in the last couple of years. The bank, which is currently does core processing on a mainframe, is in the process of moving all mission-critical functions over to the personal computer.

"We set a goal early on that we didn't want to lose any of the functionality when we moved from mainframe to PC," said Ron Gafron, management information systems director at Glenview. "That functionality is beginning to show up."

Functionality and flexibility are vital components of Glenview's customer services campaign. The core of the community bank is the individual customer relationship. Therefore, getting PCs on the front line supporting that type of relationship is the primary goal.

"The customer service platform is mission critical for small banks," Gemini Consulting's Mr. Grossman said.

Glenview's mortgage processing business in particular has reaped benefits from the use of PCs. With refinancing in vogue, the bank now handles four times as much volume with the same staff levels, Mr. Gafron said.

"Our people are getting much more done with PCs," he said.

While Houston-based QuestStar Bank relies on a mainframe, it turned to Fiserv Inc. to automate its platform area with a microcomputer-to-mainframe linkup to make the system more useful. That saves the bank the trouble of having to input the same information over and over.

Previously, a clerk opening a new account would take down the information by hand, then type it on a signature card. The information would go to the data processing area to be entered onto the mainframe, but would have to be typed once again for a new-accounts report.

"PCs have allowed our loan and new-account platform people to do things faster and easier," said Tim O'Brien, the bank's executive vice president of operations and finance.

QuestStar has also made wide use of local area networks that link each branch's computers and terminals. With the LANs, information moves quickly, giving the main bank office more control and scrutiny over each day's loan originations.

"With PCs we're gaining better access to information and maximizing it," Mr. O'Brien said.

PCs have yet to become the norm in the community bank arena, but according to the latest American Banker survey, they are definitely in the game to stay.

"In the future, PCs are going to be used everywhere in community banks," Mr. Grossman said.

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