For all the changes in banking during the last 20 years, middle-market lending a mainstay at many a banking company is still being done pretty much the same as ever. Credit policy departments still set lending standards. Officers still go out and drum up business and try to develop long-standing relationships with their customers. But a new generation of software tools has emerged to make loan officers' jobs easier, improve efficiency, and keep a closer eye on loan portfolios to avoid big losses when the economic cycle inevitably takes a turn for the worse. Last year, for example, American National Bank and Trust Co. of Chicago installed a new loan accounting system that combines both commercial and retail credits. Ryan McKenzie, senior vice president and chief information officer at the $6.6 billion-asset middle-market lending subsidiary of First Chicago NBD Corp., said the technology has helped the bank better manage its relationships with business customers. The system, from Automated Financial Systems Inc. and Littlewood, Shain & Co., went live last November. Now, lenders have a common system to view not only business customers' commercial credits, but the personal loans and transaction accounts of their owners. When I'm considering extending credit to a middle-market company that may have a personal guarantee on the loan, I have to be concerned with all of the business that that individual has with the bank so I understand my credit exposure, said Mr. McKenzie. By having it all in one place, easily accessible, I can very quickly make a determination of the total risk that we have under that relationship. Michon Schanck, a consultant with the Tower Group, Wellesley, Mass., said that while it's unusual for a bank to combine commercial and consumer loans in this way, the approach offers a distinct advantage to a major middle- market lender. AFS has a pretty sophisticated ability to do total risk exposure on commercial loans, she said, an ability that is enhanced with the installment loan feature. It's a lot easier to do when you are running a single file set. Previously, American National relied on three separate lending systems installment, consumer, and commercial. When you have to pursue the information on various systems, you are always liable to miss something, said Mr. McKenzie. One reason the bank decided early last year to upgrade the system was to prepare for a major acquisition. They didn't have to wait long American National's parent, First Chicago, merged with NBD Bancorp. last year. The Detroit bank's Illinois unit is being merged into American National. The bank, which had already used Automated Financial's Level II commercial lending software, upgraded to the more sophisticated Level III. At the same time it added the vendor's Level III installment lending component. Today, the system handles 23,000 commercial loans, 12,000 retail loans, and 2,000 overdraft checking accounts that are linked to the demand-deposits system. While American National wouldn't provide a dollar figure on savings from the new technology, it said there were clear benefits. Michele Moore, vice president of commercial banking credit systems, said the bank has reduced printing costs because reports can now be viewed on-line. Maintenance renewal costs for the two discarded systems have been eliminated. Disaster recovery tests are less expensive. And the bank said the head count in the department has been reduced, although most of those employees have been reassigned to other jobs. And if you add the soft benefits of the better information for the bankers, it's overwhelming, said Mr. McKenzie. We didn't try to quantify that. For example, the system incorporates the bank's internal risk rating system for both consumer and commercial loans, which provides for greater consistency across the portfolio. Automated Financial's software is also tied into the American National system that analyzes the profitability of all customer relationships. The PC-based system the bank had used previously generated only part of the information the bank needed, said Mr. McKenzie. The new system was a better fit. But Mr. McKenzie also emphasized that the new loan accounting system is only one step the bank has taken to promote relationship banking with its customers. And many of the changes, including the Automated Financial system and a redesign of processes in the back office, haven't fundamentally altered what the bank does. Nothing has changed, said Mr. McKenzie. All we're doing is remaining focused on chasing middle-market business and developing relationships. It allows us to continue to do that which we are already very good at.

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